Sherwood Resorts Pvt.Ltd. And Anr vs State Of Maharashtra And 7 Ors
2015 Latest Caselaw 439 Bom

                                                                                   WP2086.15.doc




                                                                                   
             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    ORDINARY ORIGINAL CIVIL JURISDICTION




                                                           
                            WRIT PETITION NO.2086 OF 2015


    Sherwood Resorts Pvt.Ltd. and another                    ... Petitioners




                                                          
          v/s
    State of Maharashtra and others                          ... Respondents

Mr Praful Joshi with Ms Karen Sequeira i/b M/s Hariani and Co. for

Petitioners.

Mr B.B. Sharma, AGP for Respondent No.1 - State.

Mr Nilesh Rikame for Respondent No.2.

CORAM: S.C. DHARMADHIKARI & B.P. COLABAWALLA JJ.

Reserved on : 29th September, 2015.

Pronounced on : 16th October, 2015.

JUDGMENT [ Per B. P. Colabawalla, J ]:-

1. Rule. Respondents waive service. By consent of parties,

Rule made returnable 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,

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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 the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 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

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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, Respondent No.2 conducted an auction of

the secured property under the provisions of the SARFAESI Act. In

this auction, the Petitioners were the highest bidder and the sale

was accordingly confirmed in their favour. 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 Rs.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 purported charge / claim of the Sales Tax Authorities in the

sum of Rs.2,77,72,073/-. It is in these circumstances that the

Petitioners challenge the legality and validity of the impugned

attachment order (Exh.'Q' to the Petition), on the ground that the

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same is arbitrary, illegal and without jurisdiction.

5. The contesting Respondents in this Writ Petition are

Respondent Nos.1, 3, 4 & 5. Respondent No.1 is the State of

Maharashtra and Respondent Nos.3 to 5 are high ranking officials

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 lubricating and other oils, petroleum products,

petro-chemicals etc. During the course of its business, Iccon Oil

obtained financial assistance from banks like Central Bank of India,

Union Bank of India and State Bank of Indore (now merged in State

Bank of India). Such assistance was obtained inter alia against

security of its immovable and movable property, including plant

and machineries. Since Iccon Oil did not pay its dues to the banks,

on 8th October 2003, Central Bank of India issued a notice under

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section 13(2) of the SARFAESI Act calling upon Iccon Oil to repay

an amount of Rs.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 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

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(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 property,

bid in the public auction held on 10th September, 2012 and offered a

consideration of Rs.2,21,50,000/-. This offer was subsequently

revised on 21st February, 2013 to Rs.2,65,00,000/-.

10. On 15th March 2013, Respondent No.2 was pleased to

accept this offer of the Petitioners and accordingly, the Petitioners

made payment of the full sale consideration of Rs.2,65,00,000/- on

21st March 2013. On 1st April 2013, Respondent No.2 confirmed

receipt of the entire sale consideration and 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

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(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 charge on the secured property in the sum of

Rs.4,30,601/-. In the said 7/12 extract, no charge of the Sales Tax

Authorities was reflected at that time. It was in these

circumstances that the Petitioners decided to bid for the secured

property. It is the further case of the Petitioners that even after the

sale of the secured property was confirmed in its favour, they once

again obtained another 7/12 extract dated 12th April, 2013 (Exh 'L'

to the Petition) which also did not reflect the purported charge of

the Sale Tax Authorities in the sum of Rs.2,77,72,073/-.

12. As stated earlier, after the entire sale consideration of

Rs.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 of sales tax dues of Iccon Oil, in addition

to the consideration paid (of Rs.2,65,00,000/-) by the Petitioners to

Respondent No.2. It is in this light that the Petitioners once again

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applied for and obtained the latest 7/12 extract dated 9th January,

2014 in respect of the secured property. It is at this time that 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

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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 Rs.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 place of business of Iccon Oil

for recovery of the sales tax dues. At this time, the Sales Tax

Inspectors learnt that the secured property had been sold by

Respondent No.2 and the same was in possession of the Petitioners.

This was duly recorded by the Sales Tax Inspectors in their

submission which is annexed at Exh. 'P' to the Petition.

14. Be that as it may, in furtherance of recovering the Sale

Tax dues, on 20th June 2014, Respondent No.3 (Commissioner of

Sales Tax, VAT, Admin.) issued a notice under 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

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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 aforesaid notice, the 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 new charge of Rs.2,77,72,073/-

was recorded in the 7/12 extract of the secured property only after

22nd May 2013, while the Petitioners had bonafide purchased the

same by paying the full consideration to Respondent No.2 on 21st

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 Rs.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, 2002.

16. Thereafter, the Petitioners, through their Advocates

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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 settle the dues of the Sales Tax

Authorities amounting to Rs.2,77,73,073/-. Thereafter, Company

Petition No.653 of 2013 as well as Company Application (L) No.603

of 2014 were disposed of by two separate orders, both dated 18th

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March, 2015. By the order passed in the Company Petition (Exh

'W' to the Petition), this Court ordered the winding up of M/s Iccon

Oil 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 Joshi, learned counsel

appearing on behalf of the Petitioners, submitted that they are the

bonafide purchasers of the secured property under a public auction

conducted by Respondent No.2 - SICOM under the provisions of the

SARFAESI Act. Admittedly, the Petitioners did not have any notice

of the dues of the Sales Tax Authorities either when they bid for the

secured property or when the sale was completed in their favour.

Mr Joshi further submitted that the sale of the secured property

was advertised 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

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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 Rs.2,21,50,000/- which was

subsequently revised on 21st February, 2013 to a sum of

Rs.2,65,00,000/-. He submitted that before purchasing the secured

property, the Petitioners had undertaken a due diligence of the title

of the secured property and obtained a 7/12 extract in respect

thereof which only recorded the charge of the District Industries

Centre, Raigad in the sum of Rs.4,30,601/-. There was no charge of

the Sales Tax Authorities reflected in the 7/12 extract dated 15th

May, 2012. It was in these circumstances that the Petitioners bid

for the secured property and Respondent No.2 was pleased to

accept the same on 15th 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

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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 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 submitted that on their

own showing the assessment orders for the periods 1999-2000,

2001-2002 and 2002-2003 were passed as far back as on 20th

October, 2006, 20th October, 2006 and 26th February, 2008

respectively. Despite this, and having their claim crystallized as far

back as on 20th October, 2006 and 26th February 2008, the Sales

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Tax Authorities did nothing to ensure that their charge / claim is

reflected in the 7/12 extract of the secured property. The Sales

Tax Authorities being this complacent, 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 of the Bombay Sales Tax Act, 1959.

21. It was the submission of Mr Joshi that where there was

only a transfer of individual assets of the defaulting Company,

rather than the defaulting Company being sold as a going concern,

those individual assets could not be chased in the hands of bonafide

purchasers. He submitted that this charge of the Sales Tax

Authorities could not be enforced against a transferee who had no

notice of the same, unless by law the requirement of such notice has

been waived. He 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

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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, Mr Sharma, learned counsel

appearing on behalf of Respondent No.1, submitted that the facts of

the present case would clearly establish that the Sales Tax

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

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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 Tahasildar, Khalapur, District

Raigad regarding the survey numbers. In this factual background,

Mr Sharma submitted that the Petitioners had full knowledge 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 property.

23. With the help of learned counsel, we have perused the

papers and proceedings in this Writ Petition alongwith the

impugned order of attachment. It is not in dispute that the secured

property was mortgaged inter alia in favour of Central Bank of

India who issued a demand notice under section 13(2) of the

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SARFAESI Act to Iccon Oil for repayment of the amounts due to it

as on 14th March, 2001. Iccon Oil did not comply with the aforesaid

demand notice. Therefore, on 17th April 2004, Central Bank 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 secured property. When this sale

notice was published, the Sales Tax Authorities did not object to the

sale of the secured property on the ground that they had a claim

against Iccon Oil. Be that as it may, pursuant to this sale notice, the

Petitioners bid for the secured property as far back as on 10th

September, 2012 for a consideration of Rs.2,21,50,000/- (which

was subsequently revised on 21st February, 2013 to

Rs.2,65,00,000/-).

24. It is also not in dispute that before bidding for the

secured property, the Petitioners obtained the 7/12 extract dated

15th May, 2012 in respect of the secured property. This 7/12

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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 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 Petitioners had no knowledge or notice of the

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charge of the Sales Tax Authorities before they purchased the

secured property from Respondent No.2 and therefore, the Sales

Tax Authorities cannot enforce their charge against the secured

property.

26. As far as the documents relied upon by Mr Sharma are

concerned, nothing has been brought to our notice that any of these

documents were brought either to the notice of Respondent No.2 or

the Petitioners, or that the Petitioners had knowledge (actual or

constructive) of the claim/charge of 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 against M/s Iccon Oil for

recovery of their dues. Furthermore, it is also an admitted fact that

when the Petitioners purchased the secured property in the public

auction conducted by Respondent No.2, no charge of the Sales Tax

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Authorities was reflected in the 7/12 extract of the said property.

The only charge reflected at that time was a charge of the District

Industries Centre, Raigad in the sum of Rs.4,30,601/-. In these

circumstances, Mr Joshi is fully justified in contending that when

they 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.1 and more

particularly paragraphs 18 to 21 thereof (of the SCC report) which

read as under:-

"Enforceability of the charge

18. The next limb of Mr Hegde's arguments was that since Section

13(2)(i) of the KST Act creates a charge on the property of the defaulting company, the charge would continue on the properties, even if it changes hands by transfer.

19. While the expression "charge" is not defined by the KST Act,

this concept is well known in property law and 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

1 (2006) 1 SCC 615 : AIR 2006 SC 865

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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 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.

Consequently, the Municipal Corporation created a charge over the property of the defaulter. However, the property was sold in execution of a mortgage decree. When the Municipal Corporation purported to exercise their charge over the property, the purchaser

in court-auction filed a suit for a declaration that he was 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 that they had purchased. This argument was, however, rejected. This Court held that while constructive notice was sufficient to satisfy the requirement of notice in the proviso to Section 100 of the TP Act, whether the transferee had constructive notice of the charge had to be determined on the facts and

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circumstances of the case. [Ibid., at SCC pp. 765-66 (para 12) : AIR pp. 1207-08(para 8)] In other words, this Court held that there

could be no fixed presumption as to the transferee having constructive 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, 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.1 This argument is stated, only to be

rejected. Firstly, the expression "charge", just like in the Karnataka

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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 rendered in the context of the provisions of the Karnataka

Sales Tax Act, 1957. Secondly, even otherwise, we find that the

very same judgment of the Supreme Court in the case of Shreyas

Papers1 has been relied upon by a another Division Bench of this

Court in the case of M/s.National Steel and Agro Industries Ltd,

Mumbai v/s the State of Maharashtra and Others.2 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 case2,

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 Court in the case of Shreyas

Papers.1 After relying upon the very same paragraphs of the

2 2015 (2) ABR 805

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Supreme Court judgment that have been reproduced above, this

Court repelled the aforesaid contention in paragraphs 35 and 36 of

its decision. In this view of the matter, we find no substance in this

argument.

31. Mr. Sharma then submitted that admittedly the sale

certificate in respect of the secured property has not yet been

registered and therefore the title to the property 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 into account the arrears of Sales

Tax dues of Iccon Oil, in addition to the consideration already paid

by the Petitioners to Respondent No.2. Admittedly, the Petitioners

are not liable for this amount as they are not the debtors of the

Sales Tax Authorities. Furthermore, when the sale of the secured

property was confirmed in favour of the Petitioners, admittedly the

charge of the Sales Tax Authorities was not reflected in the 7/12

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extract of the said property. We therefore find no substance in the

aforesaid argument canvassed by Mr Sharma.

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.

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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). However, in the facts and circumstances

of the case, we leave the parties to bear their own costs.

                                                 
     (B.P. COLABAWALLA, J.)                (S.C.DHARMADHIKARI J.)




                                        
                                   
                                  
      
   






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