S.A. No. 589 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 01.11.2022
CORAM:
THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI
S.A. No. 589 of 2013
and
M.P.No. 1 of 2013 & C.M.P. No. 9469 of 2019
1. K.Ramasamy,
S/o. Sengoda Gounder
2. P.Sengottuvel,
S/o. Palaniappa Gounder
3. K.M.Palanisamy,
S/o. Marappa Gounder ... Appellants
Vs.
Asst. Commissioner,
Commercial Tax,
Mettur Road,
Assessment Circle,
Erode-638 011. ... Respondent
PRAYER: Second Appeal filed under Section 100 of Code of Civil
Procedure, to set aside the judgment and decree dated 10.12.2012 made
in A.S.No. 98 of 2012 on the file of Principal District Judge at Erode
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S.A. No. 589 of 2013
confirming the judgment and decree dated 03.07.2012 made in
O.S.No.227 of 2010 on the file of Principal Subordinate Judge, Erode.
For Appellants : Mr.AR.L.Sundaresan,
Senior Advocate for
Mr.R.Prabakar
For Respondent : Dr.S.Suriya,
Addl. Govt. Pleader
JUDGMENT
The appellants herein are the plaintiffs in the suit in O.S.No.227 of
2010 on the file of Principal Subordinate Judge, Erode filed against the
respondent/defendant for the relief of declaration and other consequential
relief of permanent injunction restraining the defendant from bringing the
suit property for sale.
2. For the sake of convenience, the parties are referred as per the
ranking in the suit.
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3. The contention of plaintiffs is that the suit property, an extent of
2878.5 sq.ft. along with building situated in Old S.F. No.92/A, New
S.F.No.92/2 in Erode Town is originally belonged to one K.Muthusami as
his self-acquired property. The said Muthusami has two sons viz.,
Loganathan and Kumar and two daughters viz., Manjula and
Thulasimani. On 30.12.2002 under a registered settlement deed, the said
Muthusami settled the suit property measuring 2878.5 sq.ft in favour of
his second daughter. She accepted the said settlement and took
possession of the property and on the same day, the said Thulasimani
executed a Power of Attorney in favour of one V.Karthik and K.Baskaran
and the said power holders sold an extent of 698 sq.ft. in favour of 1st
plaintiff and subsequent to that, the 1st plaintiff sold the extent of 690
sq.ft. in favour of 2nd and 3rd plaintiffs through a registered sale deed
dated 08.10.2004. Thus, all the plaintiffs 1 to 3 are co-owners of the suit
property and enjoyed the same as absolute owners of the suit property.
4. While so, on 21.06.2010, in “Dinamalar” publication, they
found that the defendant has published number of items of property and
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the same were brought for sale by auction for the alleged sales tax dues
payable by late K.Muthusami and his son Loganathan, who were said to
be partners of one Kaveri Agencies. The plaintiffs are not aware of any
such tax arrears and they are bonafide purchasers purchased the suit
property for a valuable consideration. Hence, they are entitled to get
protection under Sec.24-A of Tamil Nadu General Sales Tax Act. The
plaintiffs contended that on the date of purchase by 1 st plaintiff, no such
proceedings were either pending or brought to his notice by anyone and
nor the properties were attached. Hence, they have filed a suit.
5. The defendant admits that the suit property belong to one
K.Muthusami, but denied the other allegations. The contention of the
defendant is that the said K.Muthusami and his son Loganathan were
partners of one Kaveri Agencies and right from 01.12.1993 onwards,
there were sales tax due and arrears upto the year of 1997 and the total
amount of sales tax arrears comes around Rs.9 crores. The said Kaveri
Agencies preferred an appeal before the appellate authority Assistant
Commissioner (CT), Erode, Sales Tax Appellate Tribunal I and II and
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also before this Court and all the appeals went against them. In fact, the
suit property being an immovable property belong to the said
K.Muthusami was attached and brought to sale by public auction as per
the order under the Act and notices sent to legal heirs. Accordingly,
aggrieved over the attachment of suit property, the plaintiffs filed the said
suit.
6. The defendant further contended that the execution of settlement
deed is void as per Sec.24-A of TNGST Act for the reason that any dealer
create a mortgage, gift, exchange or any other mode of transfer of his
assets in favour of any person with the intention to defraud the revenue,
such transfer shall be void. So also, the purchase made by 2nd and 3rd
plaintiffs from the 1st plaintiff also nonest in law, thereby contending that
the proceedings initiated under the provision of law is valid.
7. Before the trial court, issues were framed and documents Ex.A1
to A6 and Ex.B1 to B35 were adduced. On perusal of oral and
documentary evidence, the trial judge concludes that one of the partner of
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Kaveri Agencies, late K.Muthusami was very well aware of the tax
arrears proceedings and to defraud the claim of defendant, he purposely
executed a gift deed in respect of the suit property in favour of his 2 nd
daughter in the year 2002 and the sum and substance made by plaintiffs 1
to 3 in the year of 2004 was also not a bonafide purchase for the reason
that they have not taken any steps to transfer the names in the revenue
records and their conduct reveals that all the plaintiffs 1 to 3 are not
bonafide purchasers. Accordingly, the suit was dismissed as no merits.
8. Challenging the said findings, the plaintiffs preferred an appeal
in A.S.No. 98 of 2012 before the Principal District Judge, Erode, wherein
the lower appellate judge independently analysed the facts and law,
finally held that the said K.Muthusami, as a partner of Kaveri Agenices
had clear knowledge about the recovery of surcharge proceedings and he
executed a gift deed in favour of his 2nd daughter and she also sold the
property to 1st plaintiff only to defraud the revenue and also held that the
plaintiffs 2 and 3 are not bonafide purchasers by confirming the trial
court findings and dismissed the appeal.
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9. Challenging the concurrent findings, the plaintiffs filed this
Second Appeal contending that both the courts below failed to appreciate
the fact that the appellants herein are in continuous possession and
enjoyment of the suit property for the past several years and a mere
perusal of encumbrance certificate would clearly reveals that the property
has been sold much prior to the auction notice and no notice of
attachment of suit property was served on the plaintiffs eversince from
the year of 2003. In fact, the alleged attachment was made only in the
year of 2009 after the appellants 1 to 3 purchased the property. Hence,
they are entitled to get the benefits under Sec.24-A (i) of the TNGST Act,
but without appreciating all those facts, the courts below dismissed the
claim of plaintiffs, as such, it is unjust, unfair and the same is liable to be
set aside. Accordingly, this Second Appeal is admitted on the following
question of law :-
“ 1) Whether the courts below are correct in non-suiting
the appellants without considering the fact that the appellants
are bonafide purchaser for consideration without notice?
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2) Whether the courts below are correct in law in coming
to the conclusion that the transfer in favour of the appellants
was hit by Sec.24A of the Sales Tax Act?
3) Whether the courts below are correct in law in non-
suiting the appellants when Sec.100 of Transfer of Property
Act prohibits that no charge shall be enforced against any
property in the hands of a transferee for consideration with the
notice of charge?”
10. The learned counsel appearing for appellants/plaintiffs
submitted that all the three plaintiffs were not aware of huge arrears of
tax and proceedings pending before the respondent. However, a gift deed
was executed by one of the partner K.Muthusami in favour of his 2 nd
daughter, and subsequently, she gave a power of attorney in favour of
V.Karthik and K.Baskaran and based upon that, she sold the property in
favour of 1st plaintiff on 28.11.2003 and subsequently, the 1st plaintiff
sold the suit property in favour of 2nd and 3rd plaintiffs and all the three
plaintiffs became absolute owners of the suit property. Moreover, their
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contention is that they came to know about the surcharge proceedings
only after due publication made on 17.11.2009 and all the three plaintiffs
are holding the property without the knowledge of the proceedings
initiated under the Tamil Nadu General Sales Tax Act. So, they prayed
that they are entitled to get benefits under Sec. 24-A(i) of the Act. In this
regard, Sec.24-A of TNGST Act reads as follows:-
“24-A Transfers to defraud revenue void:- where during the
pendency of any proceeding under this Act or after the
completion thereof, any dealer creates a charge on or parts
with the possession (by way of sale, mortgage, gift,
exchange or any other mode of transfer whatsoever) of any
of his assets in favour of any other person, with the
intention to defraud the revenue, such charge or transfer
shall be void as against any claim in respect of any tax, or
any other sum payable by the dealer as a result of the
completion of the said proceedings or otherwise:-
(i) for adequate consideration and without notice of the
pendency of such proceeding under this Act, or. As the case
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may be, without notice of such tax or other sum payable by
the dealer; or
(ii) with the previous permission of the assessing authority.”
11. The learned counsel appearing for appellants/plaintiffs further
submitted that without knowledge of pendency of surcharge proceedings,
the 1st plaintiff purchased the property from 2nd daughter of K.Muthusami
and the 2nd and 3rd plaintiffs, as a bonafide purchasers purchased the
property from the 1st plaintiff, all of them are entitled to get benefits
under Sec. 24-A of TNGST Act. To encounter the same, the learned
counsel for respondent/defendant would submit that one of the partner of
Kaveri Agencies viz., K.Muthusami was aware of the said pending
arrears and he was put on notice even in the year of 1997 itself.
Challenging the said proceedings, he preferred an appeal before the
authorities and all the appeals were dismissed by the appellate authority
as well as this Court. Having knew all these proceedings, in order to
defraud the revenue, the said K.Muthusami executed a gift deed in the
year of 2002 in favour of his 2nd daughter and thereafter, she sold the
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property in favour of 1st plaintiff. Therefore, the beneficiary, the 1st
plaintiff is not entitled to claim protection under Sec.24-A (i) of the Act.
In support of his contentions, the defendant relied on the notice served in
the year of 1997 to the said K.Muthusami, one of the partner of Kaveri
Agencies and the same is enclosed in the typed set of papers, which
would clearly reveals that in the year of 1997 itself, the said Muthusami
received notice from the defendant claiming arrears of tax and thus, he
had knowledge about tax arrears. Therefore, knowingfully well about the
pendency of the said surcharge proceedings, the said K.Muthusami
executed a gift deed in favour of his 2nd daughter clearly denotes that to
defraud the claim of defendant, such document was executed. So, neither
Muthusami nor plaintiffs entitled to get any protection under Sec. 24-A
(i) of the Act and the same was rightly appreciated by the courts below,
which needs no interference.
12. Furthermore, the 1st plaintiff has no title over the property for
the reason that the alleged gift deed stands in the name of 2nd daughter of
K.Muthusami itself void under law. Hence, based upon the void
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document, the 2nd and 3rd plaintiffs are not entitled to get any better title.
Apart from that, the 2nd and 3rd plaintiffs also contended that they are
bonafide purchasers and they are entitled to get benefits under Sec.24-A
(i) of the Act. Admittedly, they have purchased the property in the year of
2004 and they were not aware of the proceedings initiated by the
defendant. But, as discussed above, the alleged gift deed executed by
K.Muthusami in favour of his 2nd daughter is void under law and
subsequently, she sold the property in favour of 1st plaintiff and though
the plaintiffs 2 and 3 have purchased the property from the 1st plaintiff in
the year of 2004, till 2010, they have not taken any steps to transfer the
names in the revenue records. Furthermore, before they purchased the
property, they ought to have made enquiry about the ownership of the
property, but no evidence placed before this court that they have made
valid enquiry. Hence, the courts below have rightly appreciated this
aspects, which needs no interference.
13. Even though the property is attached in the year of 2009, but
against these properties, surcharge proceedings were initiated from the
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year of 1993 onwards, because the arrears due of Kaveri Agencies starts
from the year of 1993 onwards. So, to defraud the claim of defendant,
one of the partner of Kaveri Agencies, K.Muthusami executed a gift deed
in favour of his second daughter and the subsequent purchase made by
the plaintiffs 1 to 3 also non-est in the eye of law. Thus, they are not
entitled to get protection under Sec.24-A (i) of the Act. Accordingly, the
question of law (1) and (2) are answered.
14. Though the attachment was effected only in the year of 2009,
but the tax due from the year of 1993 was under challenge by the Kaveri
Agencies before the Tax Appellate Tribunal and the same was negatived
by this court in the appeal proceedings. Thereafter, the defendant took
steps to attach the property, which is valid under law and the same cannot
be questioned by the plaintiffs, as they have no locus standi and the
alleged document stands in their name also void and non-est in law.
Accordingly, the question of law (c) is answered and the findings of trial
court and lower appellate judge is fair and justifiable one, which needs
no interference.
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15. In the result, this Second Appeal is dismissed as no merits and
the orders passed by learned Principal District Judge, Erode in A.S.No.98
of 2012 and learned Principal Subordinate Judge, Erode in O.S.No.227
of 2010 are confirmed. No costs. Consequently, the connected
Miscellaneous Petitions are closed.
01.11.2022
Index : Yes / No
Internet : Yes / No
Speaking/Non-speaking order
rpp
To
Principal District Judge,
Erode.
VR section
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S.A. No. 589 of 2013
T.V.THAMILSELVI, J.
rpp
Pre-delivery judgment in
S.A. No. 589 of 2013
01.11.2022
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