The City Municipal Council Of ... vs M/S Mandeep Buildtech (India) Pvt ...
2022 Latest Caselaw 2321 Kant

     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 14TH DAY OF FEBRUARY, 2022

                          PRESENT

           THE HON'BLE MRS.JUSTICE S.SUJATHA

                            AND

        THE HON'BLE MR. JUSTICE RAVI V. HOSMANI

               W.A.No.4860/2017 (LB - RES)
BETWEEN :

THE CITY MUNICIPAL COUNCIL OF
HOOTAGALLI, MYSURU DISTRICT-570 018,
REP BY ITS MUNICIPAL COMMISSIONER,
SUCCESSOR IN INTEREST OF
BELAVADI GRAMA PANCHAYAT
MYSURU TALUK & DISTRICT-570018
REP BY ITS PANCHAYAT DEVELOPMENT OFFICER

(CAUSE TITLE AMENDED VIDE
COURT ORDER DATED 14.02.2022)                  ...APPELLANT

                 (BY SRI B.J.SOMAYAJI, ADV.)
AND :

1.      M/s MANDEEP BUILDTECH
        (INDIA) PRIVATE LIMITED,
        A COMPANY REGISTERED UNDER
        THE INDIAN COMPANIES ACT
        HAVING ITS REGISTERED OFFICE
        AT 'SANDEEP NILAYAM',
        RAMAIAH REDDY COLONY,
        SECTOR-C, BASAVANAGAR,
        MARATHAHALLI POST, BENGALURU-560037
        REP BY ITS DIRECTOR RAMAIAH REDDY

2.      M/s MACHINERY MANUFACTURERS
        CORPORATION LTD., (IN LIQUIDATION)
        REP BY OFFICIAL LIQUIDATOR,
                             -2-



      HIGH COURT OF BOMBAY,
      5TH FLOOR, BANK OF INDIA BUILDING,
      M.G.ROAD, FORT, MUMBAI-400023      ...RESPONDENTS

           (BY SRI T.P.VIVEKANANDA, ADV. FOR R-1;
             SRI K.S.MAHADEVAN, ADV. FOR R-2.)

      THIS W.A. IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO SET ASIDE THE
ORDER DATED 04.07.2017 PASSED IN THE WRIT PETITION
No.36089/2015.

      THIS APPEAL COMING ON FOR ORDERS, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:

                      JUDGMENT

This intra-Court appeal is filed against the order

dated 4.7.2017 passed by the learned Single Judge in

W.P.No.36089/2015, whereby the writ petition filed by

the respondent No.1 has been disposed of setting aside

the endorsement dated 1.7.2015 (Annexure-G)

challenged therein.

2. The respondent No.1 was given liberty to

appear before the PDO in the first instance on

18.7.2017 and to adduce relevant evidence and

documents before the said authority, who was directed

to pass fresh orders in accordance with law about the

recovery of the property tax from the respondent No.1 to

the extent of its liability in this regard after the date of

confirmation of sale in its favour i.e., 8.3.2012. It has

been further observed by the writ Court that for the

recovery of the balance amount, the PDO can file his

claim before the Official Liquidator under the provisions

of the Companies Act, 1956; Once PDO passing the

fresh order in accordance with the directions of the writ

Court, the amount already paid by the respondent No.1

has to be adjusted against the said fresh demand, if

any. Being aggrieved by the said order of the learned

Single Judge, the appellant has filed this writ appeal.

3. Learned counsel appearing for the appellant

placing reliance on the judgment of the Hon'ble Apex

Court in the case of Municipal Corporation Delhi v.

M/s. Trigon Investment and Trading Pvt.Ltd.,

reported in AIR 1996 SC 1579, submitted that the

transferee of the land/building is liable to pay the tax.

There is no dispute between the local authority and the

transferee. Even in terms of the sale deed or the

conditions of auction sale, if the transferee is liable to

pay the arrears of tax, if any, only from the date of the

sale of the land/building, the transferee is liable to pay

the same and recover it from the transferor. Learned

Counsel has referred to Section 199 of the Karnataka

Grama Swaraj and Panchayat Raj Act, 1993.

4. Learned counsel appearing for the

respondent No.1 has filed the endorsement dated

14.9.2017 issued by the appellant, whereby the liability

of property tax for the years from 2011-12 to 2017-18 in

a sum of Rs.10,64,945/- and Cess of Rs.3,62,081/-,

totaling to Rs.14,27,026/- has been determined against

the respondent No.1 withdrawing the katha transfer fee

claimed at Rs.27,68,782/-. It is also acknowledged and

observed that the entire property tax of Rs.14,27,026/-

liable to be paid by the respondent No.1 having been

received, the respondent No.1 can seek for transfer of

katha relating to the property in question. Learned

counsel has submitted that pursuant to the said

endorsement dated 14.9.2017, katha has been

transferred on 26.9.2017 in the name of the respondent

No.1 relating to the property in question. Thus, the

learned counsel submits that the writ appeal does not

survive for consideration and accordingly, seeks for

dismissal of the writ appeal.

5. Learned counsel appearing for the Official

Liquidator inviting the attention of the Court to Section

530 of the Companies Act, 1956 and the affidavit filed

before the writ Court submitted that it was made clear

that a sum of Rs.1,77,43,207/- was available to the

credit of the Company (in liquidation) as on the date of

filing of the affidavit and the appellant was required to

make the claim before the Official Liquidator relating to

the property tax liable to be paid by the company in

liquidation prior to the date of the sale. Having

considered these aspects, the learned Single Judge has

rightly directed the PDO to make a claim before the

Official Liquidator under the provisions of the

Companies Act, 1956. As such, seeks for dismissal of

the appeal.

6. We have carefully considered the rival

submissions made by the learned counsel appearing for

the parties and perused the material on record.

7. It is significant to refer to the relevant

clauses of the terms and conditions of sale relating to

the property in question purchased by the respondent

No.1 in public auction held by the Official Liquidator of

the respondent No.2 - company in liquidation, under

the orders of the Bombay High Court. Clause 14 of the

said terms and conditions of sale, in the matter of M/s

Machinery Manufacturers Corporation Limited, in

liquidation, pending in Company Petition No.41/1986

before the Hon'ble High Court of Bombay reads thus;

"14. The purchaser shall be liable to pay taxes, charges, fees and outgoings in respect of immoveable and Moveable assets from the date of confirmation of sale in their favour and that any earlier taxes, charges, fees and outgoings dues and payable to any authorities till date of sale will be paid out of the sale proceeds in accordance with the provisions of the Companies Act, 1956 read with Companies (Court) Rules, 1959 by the Official Liquidator High Court Bombay."

8. Indisputably the confirmation of sale was

made on 16.3.2012. Placing reliance on the said terms

and conditions of sale, the respondent No.1 has

challenged the endorsement dated 1.7.2015 issued by

the appellant, whereby the said respondent No.1 was

directed to pay the arrears of tax till 2015-2016

determined in a total sum of Rs.52,73,588/-. The said

endorsement at Annexure-G dated 1.7.2015 apparently

does not disclose the extent of liability to pay tax by the

respondent Nos.1 and 2 as per the terms and conditions

of sale and Rules 12 and 15 of the Karnataka Panchayat

Raj (Grama Panchayats Taxes and Fees) Rules, 1994

read with Section 199 of the Karnataka Grama Swaraj

and Panchayat Raj Act, 1993. The learned Single Judge

placing reliance on the judgment of the Hon'ble Apex

Court in the case of T.Vijendradas and another v.

M.Subramanian and others, reported in (2007) 8

SCC 751, has disposed of the writ petition observing

that the liability of the vendee to pay the property tax

arises only from the date of sale.

9. Learned counsel appearing for the appellant

has strongly placed reliance on the judgment of the

Hon'ble Apex Court in the case of Municipal

Corporation Delhi, supra. The question that fell for

consideration in the said case relates to, whether the

property tax constitutes first charge upon the

land/building and because the land/building is

fastened with this liability, the liability travels with the

land/building. This question was analyzed in the

context of Section 128 of the Delhi Municipal

Corporation Act which specifically provides for the

continuation of the liability of the transferor to the

transferee till a notice is given under Section 128(1).

With great respect this judgment would not come to the

assistance of the appellant herein, wherein the property

was sold in the public auction by the official liquidator

under specific terms and conditions of sale.

10. It is significant to note that the demand

notice/letter dated 19.7.2017 was issued by the

appellant - Grama Panchayath to the respondent No.1

quantifying the tax amount from 2011-12 to 2015-16 at

Rs.5,64,945/- and from 2016-2017 to 2017-18 at

Rs.5,00,000/-, totaling to Rs.10,64,945/- along with

Cess at 34% amounting to Rs.3,62,081/-, totaling to

- 10 -

Rs.14,27,026/-. In addition to the said tax amount, an

amount of Rs.27,68,782/- was demanded towards

katha transfer charges. It has been made clear that the

said determination/quantification was made in

compliance of the order passed by this Court in

W.P.No.36089/2015. Subsequently, as per letter/

endorsement dated 14.9.2017 the amount of

Rs.27,68,782/- claimed towards transfer of katha has

been withdrawn and the demand was made to the

extent of Rs.14,27,026/- towards arrears of tax from

2011-12 to 2017-18 along with applicable Cess amount

endorsing for transfer of katha. In the said

endorsement/letter it is categorically observed that the

said demand has been made after determining the tax

amount in compliance with the order passed by the writ

Court. Further, it cannot be gainsaid that the katha of

the property in question has been transferred in the

name of the respondent No.1. That being the backdrop

of the case on hand, the arguments advanced by the

- 11 -

learned counsel for the appellant that the transferee is

liable to pay the arrears of property tax and can recover

the same from the transferor, does not stand on a terra

firma and deserves to be negated for the reasons stated

herein above. Moreover, Section 530 of the Companies

Act, 1956 provides the mechanism for recovery of the

balance amount from the Official Liquidator. As such,

the interest of the appellant has been safeguarded by

the learned Single Judge in reserving liberty to the

appellant to file its claim before the Official Liquidator.

No interference is warranted with the well considered

order of the learned Single Judge impugned.

Writ appeal being devoid of merits, stands

dismissed.

SD/-

JUDGE

SD/-

JUDGE nd