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2015 (10) TMI 2458 - BOMBAY HIGH COURT

2015 (10) TMI 2458 - BOMBAY HIGH COURT - [2016] 87 VST 250 (Bom) - Challenge to legality and validity of attachment order - Attached property purchased in auction without any notice of the alleged charge of the Sale Tax Authorities - Held that:- Petitioners attended the hearing in the Office of Respondent No.3 on 15th July, 2014 and submitted their written submissions inter alia stating that the notice issued was completely illegal and unsustainable in law. It was submitted that the purported ne .....

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tten submissions filed by the Petitioners, they also intimated the Sales Tax Authorities that the said defaulter M/s Iccon Oil was already functioning at another address duly registered under the Maharashtra Value Added Tax Act, 2002.

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 ₹ 2,77,73,073/-) w .....

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o.2 and therefore, the Sales Tax Authorities cannot enforce their charge against the secured property.

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 th .....

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able forthwith and heard finally. 2. By this Petition under Article 226 of the Constitution of India, the Petitioners challenge the legality and validity of the attachment order dated 29th April, 2013 but signed on 2nd May, 2013 (for short, the impugned attachment order ) (Exh Q to the Petition), passed by the Sale Tax Authorities. The attachment was levied on an immovable property purchased by the Petitioners pursuant to an auction conducted by Respondent No.2 - SICOM under the provisions of th .....

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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 Khal .....

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. It is in these circumstances that the Petitioners claim to be the owners of the secured property. 4. It appears that Iccon Oil, apart from being a debtor of Respondent No.2, was also in arrears of its Sales Tax dues to the tune of ₹ 2,77,72,073/-. To recover these arrears, Respondent No.5 passed the impugned attachment order, attaching the secured property. As stated earlier, it is the case of the Petitioners that when they purchased the secured property, they had no notice of the purpor .....

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of the Sales Tax Department. Respondent No.6 is the Official Liquidator of the erstwhile Iccon Oil that has been ordered to be wound up pursuant to an order dated 18th March, 2015 passed by this Court in Company Petition No.653 of 2013. Respondent No.7 is the Tahsildar of Taluka Khalapur, District Raigad and Respondent No.8 is the Talathi, Honad, Taluka Khalapur. 6. It is the case of the Petitioners that on the secured property, the said Iccon Oil carried on its business as a manufacturer of lub .....

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under section 13(2) of the SARFAESI Act calling upon Iccon Oil to repay an amount of ₹ 12,05,77,541/- as on 14th March, 2001. As Iccon Oil failed to comply, a notice was published in the newspapers 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 arisin .....

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otice 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 is where is and as is what is basis. The Petitioners, being desirous of purchasing the secured proper .....

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d requested the Petitioners to proceed with the execution of the sale certificate. 11. It is the case of the Petitioners that prior to purchasing the secured property, the Petitioners undertook a complete title due diligence and obtained a 7/12 extract dated 15th May, 2012 (Exh.'G' to the Petition) in respect of the secured property which recorded the name of Iccon Oil as the owner. The other rights column of the 7/12 extract recorded that one District Industries Centre, Raigad had a cha .....

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charge of the Sale Tax Authorities in the sum of ₹ 2,77,72,073/-. 12. As stated earlier, after the entire sale consideration of ₹ 2,65,00,000/- was paid, the Petitioners were requested to proceed with the execution of the sale certificate. It is the case of the Petitioners that the only reason the Petitioners could not obtain registration of the Sale Certificate is on account of the excessive stamp duty demanded by the registering authority by taking into account the alleged arrears .....

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ries Centre, Raigad, for the first time, the said 7/12 extract also reflected a charge of ₹ 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 ₹ 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 po .....

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8377; 2,77,72,073/-) were for the periods 1999-2000, 2001-2002 and 2002-2003. Accordingly, by a letter dated 22nd May 2013, Respondent No.7 (Tahasildar, Khalapur) enclosed a copy of the said order of attachment and directed Respondent No.8 to take further necessary action to record the charge of the Sales Tax Authorities in the sum of ₹ 2,77,72,073/-. After the Petitioners obtained possession of the secured property, on 7th April 2014, a visit was paid by the Sales Tax Inspectors to the pl .....

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nder section 62A of the Bombay Sales Tax Act, 1959 to Respondent No.2 (with a copy marked to the Petitioners) inter alia alleging that though the secured property was attached by the Sales Tax Authorities way back in April 2013, Respondent No.2 had sold the same to the Petitioners and that the said transfer being an intent to defraud the revenue, there was reason to believe that the transfer by Respondent No.2 was void under section 62A of the Bombay Sales Tax Act, 1959. 15. In view of the afore .....

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t March 2013, without any knowledge of the alleged encumbrance of the Sales Tax Authorities. At that time, the only encumbrance recorded in the 7/12 extract was a sum of ₹ 4,34,601/- due to District Industries Centre, Raigad. It is important to note that in the written submissions filed by the Petitioners, they also intimated the Sales Tax Authorities that the said defaulter M/s Iccon Oil was already functioning at another address duly registered under the Maharashtra Value Added Tax Act, .....

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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 h .....

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and appointed the Official Liquidator (Respondent No.6 herein) to take charge of the assets belonging to M/s Iccon Oil. As far as Company Application (L) No.603 of 2014 is concerned, this Court ordered that since Iccon Oil had been wound up, the Government of Maharashtra through the Department of Sales Tax, shall file their claim before the Official Liquidator (Exh X to the Petition). With these directions Company Application (L) No.603 of 2014 was disposed of. 18. In this factual background, Mr .....

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ised in the newspapers as required under the provisions of the SARFAESI Act and the Rules framed thereunder. Despite this publication, the Sales Tax Authorities did not inform Respondent No.2 of its claim or raise any objection to the sale that was to be conducted by Respondent No.2. He submitted that as far back as on 10th September 2012, the Petitioners had bid for the secured property in the sum of ₹ 2,21,50,000/- which was subsequently revised on 21st February, 2013 to a sum of ₹ .....

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pondent No.2 was pleased to accept the same on 15th March, 2013. The Petitioners thereafter made full payment of the sale consideration of ₹ 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 .....

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deration 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 jurisdiction and in flagrant violation of the principles of natural justice. 20. Mr Joshi additionally submitted that the Sales Tax Authorities have been extremely complacent, if not negligent, in pursuing their claim against Iccon Oil. He submi .....

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t, could not now decide to chase the secured property in the hands of the Petitioners, who admittedly have no outstanding dues of the Sales Tax Department. He submitted that Respondent No.5 has further been complacent by not pursuing the recovery proceedings against the defaulting Company (Iccon Oil) which is very much in existence and functioning at the address supplied by the Petitioners as is reflected in the written submissions filed by them in answer to the notice issued under section 62A o .....

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e submitted that in the present case, admittedly there has been no waiver of such notice by the Petitioners. For all the aforesaid reasons, Mr Joshi submitted that the impugned attachment order dated 29th April, 2013 and signed on 2nd May, 2013 (Exh.'Q' to the Petition) is wholly illegal and ought to be set aside by us in our writ jurisdiction under Article 226 of the Constitution of India and the Petitioners are thus also entitled to other consequential reliefs. 22. On the other hand, M .....

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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 t .....

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dge of the dues of the Sales Tax long before they decided to purchase the secured property. Having done so with open eyes, the Petitioner today cannot contend that they are bonafide purchasers for value without notice of the claim of the Sales Tax Authorities. He therefore submitted that the impugned order of attachment levied on the secured property is fully justified and the Sales Tax Authorities would be entitled to recover their dues by enforcing their charge against the said secured propert .....

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nk of India published a notice in the newspapers notifying that it had taken over possession of the secured property under the provisions of the SARFAESI Act. Thereafter, by a Deed of Assignment dated 31st March 2010, the debts (along with the underlying security) owed by Iccon Oil to Central Bank of India were assigned in favour of Respondent No.2. It is in these circumstances that Respondent No.2, to recover dues, issued a sale notice on 25th August, 2012 inviting offers in respect of the secu .....

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secured property, the Petitioners obtained the 7/12 extract dated 15th May, 2012 in respect of the secured property. This 7/12 extract did not reflect the charge of the Sales Tax Authorities. It was in these circumstances that the Petitioners bonafide believed that the only charge on the secured property was the dues of the District Industries Centre, Raigad in the sum of ₹ 4,30,601/-. Therefore, the Petitioners bid for the secured property, which bid was duly accepted by Respondent No.2 .....

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en in this 7/12 extract, the charge of the Sales Tax Authorities (in the sum of ₹ 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 Petitioners had no knowledge or notice .....

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the Sales Tax Authorities, prior to them purchasing the secured property in a public auction conducted under the provisions of the SARFAESI Act. 27. There is no dispute about the fact that the dues of Iccon Oil crystallized in favour of the Sales Tax Authorities by virtue of the assessment orders that were passed as far back as on 20th October 2006, 20th October, 2006 and 26th February 2008 respectively. Despite this, until November 2012, the Sales Tax Authorities took no action whatsoever agai .....

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purchased the property, the Petitioners had no notice of the dues payable to the Sales Tax Authorities by Iccon Oil and whose property the Petitioners purchased in the public auction. 28. On the issue of enforcement of charge, it would be apposite to refer to a decision of the Supreme Court in the case of State of Karnataka & Anr. Vs. Shreyas Papers P. Ltd. (2006) 1 SCC 615 : AIR 2006 SC 865 and more particularly paragraphs 18 to 21 thereof (of the SCC report) which read as under:- Enforceab .....

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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 t .....

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long been accepted by this Court in Dattatreya Shanker Mote v. Anand Chintaman Datar [(1974) 2 SCC 799, 811 (para 18)] and in Ahmedabad Municipal Corpn. of the City of Ahmedabad v. Haji Abdulgafur Haji Hussenbhai [(1971) 1 SCC 757, 759-61 (paras 3 & 4) : AIR 1971 SC 1201, 1202- 04(para 3)] (hereinafter Ahmedabad Municipal Corpn. ). In this connection, we may refer to the latter judgment, which is particularly relevant for the present case. 21. Ahmedabad Municipal Corpn. [(1971) 1 SCC 757, 75 .....

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s the owner of the property and that the arrears of municipal taxes due by the transferor were not recoverable from him by proceeding against the property purchased in the auction. In the appeal before this Court, the Municipal Corporation's main argument was that where the local law provided for the creation of a charge against a property for which municipal taxes were due, transferees of such properties were imputed with constructive knowledge of any charge created against the properties t .....

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tructive notice of the charge against the property. In fact, the principle laid down inAhmedabad Municipal Corpn. [(1971) 1 SCC 757, 759-61 (paras 3 & 4) : AIR 1971 SC 1201, 1202-04(para 3)] has been correctly applied in a sales tax case similar to the present case. [CTO v. R.K. Steels, (1998) 108 STC 161 (Mad)] (emphasis supplied) 29. In view of this authoritative pronouncement of the Supreme Court, in the facts of the present case we have no hesitation in holding that the Petitioners, havi .....

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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 paragrap .....

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v/s the State of Maharashtra and Others. 2015 (2) ABR 805 to which one of us (S. C. Dharmadhikari, J.), was a party. This decision was rendered in context to the Bombay Sales Tax Act, 1959. We find that this exact argument was canvassed before the the Division Bench in M/s.National Steel and Agro Industries Ltd s case 2015 (2) ABR 805, and the same was repelled by this Court. The argument canvassed before the Division Bench was that no assistance could be derived from the decision of the Supreme .....

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rty does not pass to the Petitioners. In these circumstances, Mr Sharma submitted that therefore the Sales Tax Authorities were justified in attaching the secured property and enforcing their charge against the same. In the facts of the present case, we are unable to agree with this submission. As stated by the Petitioners in their affidavit in rejoinder, the only reason why the Sale Certificate could not be registered was because the stamp duty demanded by the Registering Authority was taking i .....

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