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TMI Blog2015 (10) TMI 2458X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2002 (for short, the "SARFAESI Act"). Petitioner No.1 is a Company incorporated and registered under the provisions of the Companies Act, 1956 and Petitioner No.2 is its shareholder. It is the case of the Petitioners that the impugned attachment order was passed by Respondent No.5 (Sales Tax officer, C-008, VAT Recovery, Raigad Division, Belapur, Navi Mumbai), after the said property was purchased by the Petitioners for valuable consideration and without any notice of the alleged charge of the Sale Tax Authorities, which they now seek to enforce against the said property. 3. It is the case of the Petitioners that one M/s. Iccon Oil and Specialties Ltd (for short, "Iccon Oil") was the owner of an immovable property consisting of land and factory buildings, other structures and plant and machinery, situate at Plot No.1, Survey No.59 (Part) of Village Honad, at Takai - Adhoshi Road, Taluka Khalapur, District Raigad, area of plot admeasuring approximately 10,790 sq.mtrs. and built up area thereon admeasuring 10,552.31 sq.ft. (hereinafter referred to as the "secured property"). The said Iccon Oil was also a debtor of Respondent No.2 - SICOM. To recover its dues from Iccon Oil, Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 17th April, 2004 notifying that Central Bank of India had taken over possession of the secured property under the provisions of the SARFAESI Act. 7. Thereafter, by a Deed of Assignment dated 31st March 2010, Respondent No.2 - SICOM inter alia acquired all the right, title and interest arising out of the loan disbursed by the said Central Bank of India to Iccon Oil, alongwith the assignment of the secured property. Therefore, by virtue of this Deed of Assignment, Iccon Oil became the debtor of Respondent No.2. 8. Since Iccon Oil did not honour its debt, under the provisions of the SARFAESI Act, Respondent No.2 sought to enforce its security by sale of the secured property. Accordingly, on 9th December, 2011 Respondent No.2 published a sale notice which was followed by another sale notice on 28th December, 2011. These sale notices were challenged by Iccon Oil in the Debt Recovery Tribunal (DRT), as well as the Debt Recovery Appellate Tribunal (DRAT), without any success. 9. Since the said challenge failed, Respondent No.2 once again issued a sale notice on 25th August, 2012 under the provisions of the SARFAESI Act, inviting offers in respect of the secured property on an "as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they were shocked and surprised to note that now the said 7/12 extract showed an additional entry. Now, apart from the earlier charge of Rs. 4,30,601/- of the District Industries Centre, Raigad, for the first time, the said 7/12 extract also reflected a charge of Rs. 2,77,72,073/- of the Sales Tax Authorities. This was duly brought to the notice of Respondent No.2 and Respondent No.2 was informed that this charge of the Sales Tax Authorities in the sum of Rs. 2,77,72,073/- was not reflected in the 7/12 extract when they purchased the secured property from Respondent No.2. Thereafter, it is stated in the Petition that the Petitioners have obtained physical possession of the secured property with the help of Police Officials of Khopoli Police Station on 3rd April, 2014. This is how they claim to be in possession as well as the owners of the secured property. 13. As mentioned earlier, an order of attachment dated 29th April, 2013 but signed on 2nd May, 2013 (Exh 'Q' to the Petition) was passed by Respondent No.5 attaching the secured property for recovery of the outstanding dues of the Sales Tax Authorities. These dues of M/s Iccon Oil (in the sum of Rs. 2,77,72,073/-) were for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duly registered under the Maharashtra Value Added Tax Act, 2002. 16. Thereafter, the Petitioners, through their Advocates and Solicitors, also addressed a letter dated 22nd June 2015 to Respondent No.5 calling upon him to direct the Office of the Respondent No.7 to withdraw / cancel the alleged charge of the Sales Tax Authorities and submit a copy of the written communication to the Petitioners within 7 days of receipt of the said letter. No action was taken on this letter and neither has the impugned order of attachment been lifted and / or cancelled. It is in these circumstances that the Petitioners have approached us inter alia praying that the impugned order of attachment be quashed and set aside. 17. For the sake of completeness, we must mention here that apart from taking action under the provisions of the SARFAESI Act, Respondent No.2 also initiated winding up proceedings against Iccon Oil, by filing Company Petition No.653 of 2013 in this Hon'ble Court. In the said Company Petition, on or about 18th November, 2014 Respondent No.5 herein (Sales Tax Officer, C008) filed Company Application (L) No.603 of 2014 praying that this Court be pleased to direct Iccon Oil to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th March, 2013. The Petitioners thereafter made full payment of the sale consideration of Rs. 2,65,00,000/- on 21st March 2013, the receipt of which was duly confirmed by Respondent No.2 on 1st April, 2013 and the Petitioners were accordingly requested to proceed with the execution of the Sale Certificate. 19. Mr Joshi submitted that even after the purchase of the secured property, they once again obtained a 7/12 extract dated 12th April, 2013 which also did not reflect the purported charge of the Sales Tax Authorities to the tune of Rs. 2,77,73,073/-. This alleged charge of the Sales Tax Authorities was for the first time reflected in 7/12 extract dated 9th January, 2014. This was long after the secured property was purchased by the Petitioners in the public auction conducted by Respondent No.2. Looking to all these facts, Mr Joshi submitted that the Petitioners were bonafide purchasers of the secured property for valuable consideration and without any notice of the charge/dues of the Sales Tax Authorities and therefore the impugned attachment order passed by Respondent No.5 in relation to the secured property and belonging to the Petitioners, was arbitrary, capricious, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Authorities were diligent in pursuing their claim against Iccon Oil. He submitted that after the assessment orders were passed on 20th October 2006, 20th October, 2006 and 26th February 2008, a notice under section 39 of the Bombay Sales Tax Act, 1959 was served on Iccon Oil on 17th November, 2012. Thereafter, a notice dated 19th November, 2012 was issued and served upon Iccon Oil under section 178 of the Maharashtra Land Revenue Code, 1966. Thereafter, on 26th December, 2012 an order of attachment in Form No.4 was issued under section 182 of the said Maharashtra Land Revenue Code 1966. Accordingly, on 3rd January 2013, the Tahasildar of Khalapur, District Raigad (Respondent No.7) directed the Talathi of Honad Village (Respondent No.8) to lodge the claim of the Sales Tax Authorities in the 7/12 extract which was duly acknowledged by the Talathi's Office. On 12th March 2013, the said Talathi, Honad Village informed the Tahasildar, Khalapur that he had taken note of the sales tax dues and made an entry in Ferfar Note 1483 dated 15th January, 2013 as per the directions of the Tahasildar. Thereafter, on 29th April, 2013 additional information was provided in Form No.4 to the Taha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the only charge on the secured property was the dues of the District Industries Centre, Raigad in the sum of Rs. 4,30,601/-. Therefore, the Petitioners bid for the secured property, which bid was duly accepted by Respondent No.2 on 15th March, 2013. In fact, the Petitioners made full payment of the sale consideration of Rs. 2,65,00,000/- on 21st March 2013, the receipt of which was duly accepted by the Respondent No.2 on 1st April 2013. From these facts it is clear that the sale of the secured property was confirmed in favour of the Petitioners on 1st April, 2013. 25. Even after the purchase of the secured property, the Petitioners once again obtained a 7/12 extract of the secured property dated 12th April, 2013. Even in this 7/12 extract, the charge of the Sales Tax Authorities (in the sum of Rs. 2,77,73,073/-) was not reflected. It is only for the first time on 7th January, 2014 that the charge of the Sales Tax Authorities was reflected in the 7/12 extract of the secured property. This was much after the sale of the secured property was confirmed in favour of the Petitioners. In these circumstances, we find that Mr Joshi is fully justified in contending that the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has been defined by Section 100 of the Transfer of Property Act, 1882 (hereinafter "the TP Act"). Here "charge" is defined as: "100. 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 simple 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 to whom such property has been transferred for consideration and without notice of the charge." (emphasis supplied) 20. As the section itself unambiguously indicates, a charge may not be enforced against a transferee if she/he has had no notice of the same, unless by law, the requirement of such notice has been waived. This position has long been accepted by this Court in Dattatreya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no hesitation in holding that the Petitioners, having no knowledge of the charge of the Sales Tax Authorities before they purchased the secured property, the Sales Tax Authorities could not enforce their charge against the secured property. 30. Faced with this situation, Mr Sharma submitted that the ratio of the aforesaid Supreme Court decision cannot be applied to the facts of the present case as the provisions under consideration before the Supreme Court were that of the Karnataka Sales Tax Act, 1957 and not of the Bombay Sales Tax Act, 1959. On this ground he sought to distinguish the judgment of the Supreme Court in the case of Shreyas Papers. (2006) 1 SCC 615 : AIR 2006 SC 865. This argument is stated, only to be rejected. Firstly, the expression "charge", just like in the Karnataka Sales Tax Act, 1957, is also not defined in the Bombay Sales Tax Act, 1959. On the issue of enforceability of charge, the Supreme Court, whilst considering the provisions of Section 100 of the Transfer of Property Act, 1882 gave its findings in paragraphs 18 to 21 thereof. These findings are binding on us and we cannot distinguish the aforesaid decision on the specious ground that the same is rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32. We also must note here that Iccon Oil was wound up by and under the orders of this Court and this Court by its order dated 18th March 2015, passed in Company Application (L) No.603 of 2014, has given liberty to the Sales Tax Authorities to file their claim before the Official Liquidator. We are informed that the claim of the Sales Tax Authorities has also been filed thereafter with the Official Liquidator of this Court and we are of the view that the Sales Tax Department is free to pursue its claim against Iccon Oil. 33. Before parting, we must clarify that we haven't entered upon any controversy regarding the priority the Sales Tax Authorities may have on the sale proceeds received from the sale of the secured property to the Petitioners. The priority, if any, of the Sales Tax Authorities is not in issue before us and therefore we should not be understood to have rendered any finding in that regard. The issue of priorities shall be decided in appropriate proceedings before the appropriate forum, and in accordance with law. 34. In view of our foregoing discussion, Rule is made absolute and the Writ Petition is granted in terms of prayer clauses (a), (b), (e), (g) and (h). How ..... X X X X Extracts X X X X X X X X Extracts X X X X
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