TMI Blog2006 (7) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... register in respect of encumbrance of the first respondent. Thus, it is evident that the appellants had no actual notice of the charge prior to the transfer. There is also no material to show that the appellants had constructive notice of the charge and no submissions were made by the learned Special Government Pleader on this issue. Hence, we are of the view that the appellants were the purchasers for value without notice for the sales tax arrears of the defaulting company or the consequent charge on the property. Thus, the property in the hands of the appellants was free of the charge and it is not open to the first respondent to enforce the liabilities of the defaulting company in this manner against the appellants. Insofar as the alternative submission of the learned Special Government Pleader that the charge created u/s 23 of the TNGST Act will have priority over the mortgage created in favour of the City Union Bank, it is not necessary for us to express any opinion thereon in the present case, since the bank is not a party to the present proceedings. The first respondent is entitled to adopt such proceedings as permissible in law to establish its rights against the ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed on April 23, 2003, as there was no application from any statutory or public authority seeking to set aside the sale. A sale certificate has also been issued on July 8, 2003, followed by a letter from the Recovery Officer addressed to the Sub-Registrar, Erode, the second respondent herein, requesting him to make the necessary entries in the register maintained by the second respondent. On payment of adequate stamp duty, the entry of the sale certificate has been registered by the second respondent and the encumbrance certificate has been issued, showing the appellant as the absolute owners of the property. 5. It appears that the property belonged to one S.K. Veerappa Chettiar Company and others and since the said Company was in arrears of sales tax under the TNGST Act, by letter dated June 25, 2004, the Commercial Tax Officer, Erode, the first respondent herein, required the second respondent herein to create an encumbrance with regard to the property and an entry was made in the register in respect of the encumbrance of the first respondent. Immediately on coming to know about the encumbrance created, a legal notice had been sent on April 4, 2006 by the appellants to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mortgagee of the property in question and therefore, the Department should be allowed to recover the amount due from the City Union Bank. 8. The short question is whether the charge created on a property under the TNGST Act is enforceable against a transferee of such property. The expression charge is not defined by the TNGST Act. However, this concept is well-known in law of transfer of property and has been defined by section 100 of the Transfer of Property Act, wherein the word charge is defined as follows: Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simply mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, firstly, no provision of law has been cited before us that exempts the requirement of notice of the charge for its enforcement against a transferee who had no notice of the same. It remains to be seen, therefore, if in the facts of the present case, the first respondent had notice actual or constructive of the charge. At the outset, in the advertisement/notice dated March 17, 1992, issued by the corporation, mention is only made of the sale of the defaulting company's assets and there is no indication, whatsoever, of any sales tax arrears. Further, the bid offer made on behalf of the first respondent on June 5, 1992 specifically excludes any statutory liabilities, including sales tax. This offer was accepted by the Corporation on July 15, 1992. Even at that stage, there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated August 12, 1992 in which a specific clause was inserted that the first respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i.e., August 12, 1992). For the first time, by letter dated January 8, 1993 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was conducted in execution of the recovery certificates issued by the Debts Recovery Tribunal for recovery of dues to the City Union Bank. The appellants had paid the entire amount due on March 25, 2003 and the sale was confirmed in their favour on April 23, 2003. There is no indication of any sales tax arrears in the advertisement for auction sale and there was no application from any statutory or public authority seeking to set aside the sale. For the first time, by letter dated June 25, 2004 the Commercial Tax Officer required the second respondent to create an encumbrance with regard to the property and consequently an entry was made in the register in respect of encumbrance of the first respondent. Thus, it is evident that the appellants had no actual notice of the charge prior to the transfer. There is also no material to show that the appellants had constructive notice of the charge and no submissions were made by the learned Special Government Pleader on this issue. In the circumstances, we are of the view that the appellants were the purchasers for value without notice for the sales tax arrears of the defaulting company or the consequent charge on the property. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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