TMI Blog2016 (11) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... ay have on the sale proceeds received from the sale of the said 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 between the Sales Tax Authorities and Respondent Nos.1 and 2 shall be decided in appropriate proceedings before the appropriate forum and in accordance with law. Petition disposed off - decided in favor of petitioner. - WRIT PETITION NO. 4188 OF 2014 - - - Dated:- 22-11-2016 - S. C. DHARMADHIKARI B.P. COLABAWALLA, JJ. Mr. Rafique Dada, Sr. counsel along with Mr Ravi Kadam, Sr. Counsel a/w Dr. Birendra Saraf, Mr Jai Chhabria Ms Ayushi Anandpara i/b M/s Federal Rashmikant for the Petitioners. Mr. Karl Shroff a/w Mrs Hema Desai, Mr Vijay L. Hinge i/b Singhi Co. for Respondent Nos.1 and 2. Ms Sushma Bhende AGP for Respondent No.3. Mr Ashok Kotangle, Spl. Counsel for Respondent No.4. JUDGMENT [ PER B. P. COLABAWALLA J ]: 1. Rule. Respondents waive service. By consent of parties, rule is made returnable forthwith and heard finally. 2. By this Writ Petition under Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of the SARFAESI Act. It is in these facts and circumstances, that it is the contention of the Petitioners that the Sales Tax Authorities cannot enforce their alleged charge on the said property purchased by the Petitioners, and if at all the Sales Tax have any charge, it would have to be recovered from the sale proceeds which lie in the hands of Respondent Nos.1 and 2. It is in this backdrop, that the present Writ Petition has been filed. 4. The brief facts giving rise to the present controversy are as under:- (a) Petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and has purchased the said property. Petitioner No.2 is the CEO and Managing Director of Petitioner No.1. For the sake of convenience, they are collectively referred to as the Petitioners. Respondent No.1 is the Bank of Maharashtra and Respondent No.2 is the Bank of Baroda, who had both granted financial assistance to the Defaulter Company. Respondent No.3 is the State of Maharashtra and Respondent No.4 is the Sales Tax Department, through the Deputy Commissioner, Satara. It is the case of Respondent No.4 that the Defaulter Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the Defaulter Company's dues. It was further assured to the Petitioners that except the mortgage in favour of Respondent Nos.1 and 2, there were no liabilities or other encumbrance on the said property whatsoever. The Petitioners were also furnished with a valuation Report carried out for the purposes of the auction sale. This valuation indicated the market value of the said property and the reserve price was fixed without any liability or encumbrances attached to it. It is, on the basis of these representations, that the Petitioners decided to participate in the auction sale and bid for the said property. (e) Accordingly, on 1 September, 2010, the Petitioners placed their bid for purchasing the said property at a price of ₹ 11,00,29,000/- and submitted their EMD of ₹ 1.10 Lacs. Since, the Petitioners were the highest bidders, they were declared as the successful bidder and a formal 'letter of acceptance' was also issued by Respondent No.1. This acceptance letter called upon the Petitioners to make a further payment of 25% of the said price (Rs.2,75,07,250/-) immediately. Further, the EMD was to be adjusted against this amount of ₹ 2,75,07,250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve their name mutated in the 7/12 extract, the Petitioners would have to obtain a no claim certificate from Respondent No.4 (Sales Tax Department). Accordingly, the Petitioners addressed a letter dated 26 August, 2011 to Respondent No.4 setting out the material facts and seeking a no claim certificate . It is, at this stage, that the Petitioners were shocked to learn about the claim of Respondent No.4 amounting to ₹ 28 Crores. Thereafter, the Petitioners made several applications under the Right to Information Act, 2005 without any success. (i) In these circumstances, the Petitioners initiated appropriate proceedings before the Revenue Authorities for recording their names in the revenue record without the aforesaid liability. These proceedings finally culminated in an order passed by the Talathi s Office wherein the Petitioners' application was allowed and the Petitioners' name was entered in the 7/12 extract subject to the encumbrance of ₹ 18,38,709/- of the Sales Tax Department. (j) Being aggrieved by this, Respondent No.4 challenged the same by way of appellate proceedings and a stay order was obtained before the Additional Collector, Satar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a submitted that the Sales Tax Authorities cannot enforce their alleged charge against the said property which has been legitimately purchased by the Petitioners without notice of the alleged dues of the Sales Tax Department and/or their statutory charge under Section 38C of the Bombay Sales Tax Act, 1969 ( BST Act ). In support of the aforesaid propositions, Mr Dada relied upon the following decisions: (i) M/s National Steel and Agro Industries Ltd. Vs. The State of Maharashtra and Ors.Writ Petition No.2608 of 2014 decided on 12 February, 2015 and (ii) Sherwood Resorts Pvt. Ltd. Anr. Vs The State of Maharashtra. Writ Petition No.2086 of 2015 decided on 16 October, 2015. 6. For all the aforesaid reasons, Mr Dada submitted that the Sales Tax Department (Respondent No.4) be directed to refrain from recovering its dues by enforcing its alleged charge on the said property legitimately purchased by the Petitioners and without any notice of the dues of Sales Tax Department. 7. On the other hand, Mr Kotangle, Special Counsel appointed for Respondent No.4, submitted that Respondent No.4 was fully justified in enforcing its charge against the said property. Mr Kotangle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets and enforcement of security interest or matters incidental thereto. The term 'debt' is defined in section 2(ha) and the term security interest is defined under Section 2(zf) to mean right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes a mortgage, charge, hypothecation, assignment other than those specified in Section 31. The term secured asset is also defined in Section 2(zc) to mean the property on which the security interest is created. In turn, the words secured debt is defined in Section 2(ze) to mean a debt which is secured by any security interest. The term secured creditor is also defined in Section 2(zd) and it is not in dispute that Respondent Nos.1 and 2 are the secured creditors as defined under the SARFAESI Act. Thereafter, Section 13 of the SARFAESI Act provides for enforcement of security interest and measures by which enforcement is permissible including upon failure of the borrower to discharge its liability in full of the secured creditor within the period specified under Section 13(2) by taking possession of the secured assets and transferring the same either by way of lease, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioners had either informed or had constructive knowledge of their dues, save and except to the extent of ₹ 18,38,709/-. This being the factual position, we find considerable force in the argument of Mr Dada that the Sales Tax dues (save and except to the extent of ₹ 18,38,709/-) cannot be recovered by enforcing their alleged charge under Section 38C of the BST Act against the said property, legitimately purchased by the Petitioners and without having any notice of the alleged dues of the Sales Tax Authorities. 12. What is also important to note is that, it is not even the case of Sales Tax Authorities that the Petitioners are a dealer within the meaning of provisions of the BST Act or that the Petitioners have taken over the business of the dealer who is the defaulter of the Sales Tax Authorities. In fact, on a careful perusal of Section 19(4) of the BST Act, it is clear that where a dealer who is liable to pay tax under the BST Act, transfers or otherwise disposes of his business in whole or in part or effects any change in the ownership thereof, in consequence of which he is succeeded in the business or part thereof by any other person, the dealer and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, 759-61 (paras 3 4) : AIR 1971 SC 1201, 1202-04(para 3)] was a case where a person was in arrears of property tax, due under the Bombay Provincial Municipal Corporation Act, 1949. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1959. On this ground, he sought to distinguish the judgment of the Supreme Court in the case of Shreyas Papers Pvt. Ltd. 2006 (1) SCC 615 : AIR 2006 SC 865 We find absolutely no merit in this contention. Firstly, the expression charge , just like in the Karnataka Sales Tax Act, 1957 is also not defined in the Bombay Sales Tax Act, 1959. Thus, on the issue of enforcement of the charge, the Supreme Court, while considering the provisions of Section 100 of the Transfer of Property Act, 1882, gave its findings in paragraph Nos.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 rendered in the context of the provisions of the Karnataka Sales Tax Act, 1957. Secondly, even otherwise we find that this very judgment of the Supreme Court (Shreyas Papers Pvt. Ltd. 2006 (1) SCC 615 : AIR 2006 SC 865 ) has been relied upon by a Division Bench of this Court in the case of M/s National Steel and Agro Industries Ltd. Vs. The State of Maharashtra and Ors. Writ Petition No.2608 of 2014 decided on 12 February, 2015 to which one of us (S. C. Dharmadhikari, J) was a party. This decision was rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst charge. We find that the reliance placed on the aforesaid decision in the factual matrix before us is wholly inapposite. In any event, this decision of the Supreme Court was rendered prior to the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. By virtue of this Amending Act inter alia the provisions of the SARFAESI Act have been amended and a specific section, namely, Section 26-E has been inserted which gives priority to secured creditors subject to the conditions and exceptions set out in said section. A similar provision has also been inserted in the RDDB Act, namely Section 31-B. This being the position, we find that the reliance placed on the aforesaid decision by Mr Kontangale is wholly misplaced. 18. For all the aforesaid reasons, we hold that the Sales Tax Authorities (Respondent No.4) cannot recover the dues of the Defaulter Company from the Petitioners (save and except to the extent of ₹ 18,38,709/-) by enforcing their charge under Section 38C of the BST Act on the said property. However, it is clarified that our order and direction does not mean that the Sales Tax Authorities cannot proceed aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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