THE HON'BLE SRI JUSTICE UJJAL BHUYAN
AND
THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA
W.P.No.2353 OF 2003
W.P.No.5335 OF 2012
AND
W.P.No.13206 OF 2021
COMMON JUDGMENT AND ORDER:
(Per Hon'ble Sri Justice Ujjal Bhuyan)
All the three writ petitions were heard together and are
being disposed of by this common judgment and order.
2 We have heard Sri Dammalapati Srinivas, learned senior
counsel for the petitioners in W.P.No.5335 of 2012, respondent
No.4 in W.P.No.2353 of 2003 and W.P.No.13206 of 2021; Sri
B.S.Prasad, learned Advocate General for the State respondents
in all the three writ petitions; and Sri B.Adinarayana Rao,
learned senior counsel for the petitioners in W.P.No.2353 of
2003 and 13206 of 2021 and respondent No.5 in W.P.No.5335
of 2012.
W.P.No.2353 of 2003:
3 This writ petition has been filed by the petitioner M/s.
Gupta Metallics & Power Limited. Initially, the Government of
Andhra Pradesh, represented by the District Collector, Ranga
Reddy District and the Board for Industrial and Financial
Reconstruction were arrayed as respondents.
4 By filing this writ petition under Article 226 of the
Constitution of India, petitioner M/s. Gupta Metallics & Power
Limited (for short, 'Gupta Metallics', hereinafter) seeks a 2
declaration that the action of the respondents in forfeiting an
amount of Rs.61,80,000-00 paid by the petitioner Gupta
Metallics towards 15% of the price for purchase of the
auctioned land pursuant to Gazette Notification dated
18.12.2002, if the balance amount was not paid within 30 days
from the date of sale is arbitrary, unreasonable and illegal and
seeks a direction to the first respondent not to forfeit the said
amount of Rs.61,80,000-00.
5 Case of the petitioner Gupta Metallics is that it is a
company incorporated under the Companies Act, 1956, having
its registered office at Nagpur in the State of Maharashtra.
Gupta Metallics is carrying on the business of trading in coal
products. First respondent in accordance with the provisions of
the Andhra Pradesh Revenue Recovery Act, 1864 (for short,
"Revenue Recovery Act" hereinafter) and the Rules framed
thereunder, issued a Gazette Notification on 18.12.2002,
whereby the property mentioned in the said Gazette was being
put to auction sale.
6 Pursuant to the Gazette Notification, petitioner Gupta
Metallics approached the first respondent and participated in
the auction sale that was held on 10.01.2003 in which it
became the highest bidder. It is stated that auction of the said
property was held in view of the fact that the company whose
properties were being auction sold had become a sick industrial
unit under the provisions of the Sick Industrial Companies 3
(Special Provisions) Act, 1985 and had defaulted in the payment
of tax dues.
7 Elaborating further, according to petitioner Gupta
Metallics, 52 bidders including itself had participated in the
auction sale in which petitioner Gupta Metallics became the
highest bidder. The upset price in the said auction was fixed at
Rs.20,00,000-00 per acre of the land. The sale was in favour of
the petitioner Gupta Metallics for a consideration of
Rs.30,50,000-00 per acre. The land auction sold measured
Ac.13-20 guntas in Sy.Nos.57, 58, 59, 60, 61, 62, 63, 64,
68(AA) and 86/AA situated at Gaganpahad village,
Rajendranagar Mandal, Ranga Reddy District. The total sale
consideration worked out to Rs.4,11,75,000-00.
8 In terms of Section 36 of the Revenue Recovery Act, Gupta
Metallics immediately deposited 15% of the purchase price
which worked out to Rs.61,76,250-00 (rounded off to
Rs.61,80,000-00) by way of bankers cheques, one dated
09.01.2003 and other six dated 10.01.2003 on the date of the
sale i.e., on 10.01.2003. Receipt of the aforesaid amount was
acknowledged by the Deputy Commercial Tax Officer,
Rajendranagar and authorised nominee of the first respondent.
Petitioner Gupta Metallics was asked to deposit the balance
85% of the bid amount within 30 days of sale.
9 Petitioner Gupta Metallics made all arrangements for
collection and payment of the balance 85%. In the meanwhile, 4
second respondent i.e. Board for Industrial and Financial
Reconstruction ('BIFR' hereinafter) passed an order on
16.01.2003 by which Collector of Ranga Reddy District was
directed to stay execution of the sale of the land auctioned on
10.01.2003. Deputy Commercial Tax Officer, Rajendranagar
Circle was show caused as to how he could approach the
Collector for initiating proceedings under the Revenue Recovery
Act without the prior approval of BIFR and in violation of
Section 22 (1) of the Sick Industrial Companies (Special
Provisions) Act, 1985 (briefly, "the 1985 Act" hereinafter).
10 In view of the aforesaid order dated 16.01.2003 passed by
the BIFR, petitioner Gupta Metallics made enquiries with the
officials of the Commercial Taxes Department. However,
Commercial Taxes Department authorities insisted upon the
petitioner Gupta Metallics to deposit the balance 85% of the bid
amount failing which it was stated that the amount deposited
by the petitioner would be forfeited.
11 Contending that the aforesaid action of the first
respondent is arbitrary and unreasonable, thus violative of
Article 14 of the Constitution of India, petitioner Gupta
Metallics has filed the present writ petition seeking the reliefs
as indicated above.
12 Commissioner of Commercial Taxes, Government of
Andhra Pradesh got himself impleaded as third respondent in
W.P.No.2353 of 2003. In the counter affidavit filed by the third 5
respondent on 18.02.2003 it was stated that M/s. Vinedale
Distilleries Limited, Gagahpahad, Ranga Reddy District, is a
registered dealer under the Andhra Pradesh General Sales Tax
Act, 1957 and the Central Sales Tax Act, 1956. M/s. Vinedale
Distilleries Limited (referred to as "Vinedale Distilleries",
hereinafter) is a manufacturer and seller of India Made Foreign
Liquor (IMFL) which is exigible to sales tax. Vinedale
Distilleries approached BIFR under the 1985 Act contending
that it was a sick company and sought for rehabilitation. BIFR
registered the case of Vinedale Distilleries as Case No.70/1989.
A scheme was framed for rehabilitation of the sick company -
Vinedale Distilleries on 24.09.1991 by the BIFR. In view of
such scheme, no coercive steps could be taken by the creditors
for recovery of sales tax dues in the light of the embargo under
Section 22 (1) of the 1985 Act.
13 It is stated that by order dated 19.05.2000, BIFR had held
that arrears of Vinedale Distilleries for the period prior to
24.09.1991 should not be enforced without the permission of
BIFR. However, BIFR gave liberty to the Commercial Taxes
Department to recover the sales tax dues of Vinedale Distilleries
subsequent to 24.09.1991
14 While the arrears prior to 24.09.1991 stood at
Rs.1,20,18,609.00, the arrears relating to post 24.09.1991 were
worked out at Rs.3,39,35,129-00. Commercial Taxes
Department thereafter took steps to recover the arrear tax 6
amount. Consequently, Gazette Notification for public auction
of the lands belonging to Vinedale Distilleries, admeasuring
Ac.67-13 guntas was issued. Public auction for sale of the land
took place on 10.01.2003. But that was confined to only the
land at Sy.Nos.58 and 59.
15 In the public auction held on 10.01.2003, several bidders
including the petitioner Gupta Metallics had participated.
Gupta Metallics became the highest bidder in respect of the
land admeasuring Ac.13-50 acres located at Sy.Nos.58 and 59
of Gaganpahad village under Rajendranagar Mandal in Ranga
Reddy District for an amount of Rs.30,50,000-00 per acre.
Total value of the land (Ac.13.50) came to Rs.4,11,75,000-00. In
compliance to the requirements of the Revenue Recovery Act,
the auction purchaser i.e. petitioner Gupta Metallics paid 15%
of the aforesaid amount i.e. Rs.61,80,000-00 through bankers
cheques dated 09.01.2003 and 10.01.2003 on the date of the
sale itself.
16 However, BIFR passed an ex parte order on 16.01.2003,
directing the Collector of Ranga Reddy District to stay execution
of the sale of the land auctioned on 10.01.2003. Deputy
Commercial Tax Officer, Rajendranagar Circle, was directed to
explain under what circumstances he had approached the
Collector of Ranga Reddy District for sale of the land under the
Revenue Recovery Act without the consent of BIFR. 7
17 Assailing the order dated 16.01.2003 passed by the BIFR,
State of Andhra Pradesh filed a writ petition before this Court
which was registered as W.P.No.2139 of 2003. A Division
Bench of this Court, by order dated 06.02.2003 directed that
any confirmation of sale would be subject to further orders of
the Court.
18 Petitioner Gupta Metallics, despite being the highest
bidder, did not approach the Commercial Taxes Department for
confirmation of sale. However, it is stated that as and when
petitioner approaches the Commercial Taxes Department, it
would be asked to pay the balance amount before confirmation
of sale. It is further stated that as on 18.02.2003, there was no
attempt to forfeit the amount of Rs.61,80,000-00 paid by the
petitioner Gupta Metallics.
19 This Court by order dated 07.02.2003 issued notice and
passed an interim order not to forfeit the amount of
Rs.61,80,000-00 deposited by the petitioner Gupta Metallics.
20 Subsequently, third respondent i.e. Commissioner of
Commercial Taxes filed another counter affidavit on
10.07.2021. It is stated that petitioner Gupta Metallics had
filed an additional affidavit seeking a direction to the
respondents to return the amount deposited by it and to treat
the sale proceedings as non-est. That apart, on account of
further developments, it is stated that it has become necessary 8
to place certain facts before the Court for better appreciation
and adjudication. Therefore, the additional counter affidavit
has been filed with the submission that the additional counter
affidavit may be treated as part of the counter affidavit filed on
18.02.2003
21 It is stated that Vinedale Distilleries, a company
incorporated under the Companies Act, 1956, fell in arrears of
sales tax dues of the Commercial Taxes Department to the tune
of Rs.4,58,00,000-00. Vinedale Distilleries approached BIFR in
BIFR Case No.70/1989. In the meanwhile, land of Vinedale
Distilleries was attached, which was auctioned on 10.01.2003
for realization of the sales tax arrears. In the auction petitioner
Gupta Metallics became the highest bidder in respect of the
said land for an amount of Rs.4,11,75,000.00. Gupta Metallics
paid 15% of the said amount i.e. Rs.61,80,000-00 on the date
of auction itself i.e. 10.01.2003.
22 Ms. BDA Limited, New Delhi, originally planned to take
over Vinedale Distilleries and approached BIFR in Case
No.70/1989. At its instance, order dated 16.01.2003 was
passed by BIFR staying execution of sale of land.
23 Assailing the order of BIFR dated 16.01.2003, the State of
Andhra Pradesh filed W.PNo.2139 of 2003 before this Court.
This Court passed an order on 10.02.2003 to the effect that any
confirmation of sale would be subject to further orders of this
Court.
9
24 Petitioner Gupta Metallics did not take steps for
confirmation of sale by depositing 85% of the balance purchase
price. Instead, petitioner filed the related writ petition.
25 It is contended that Gupta Metallics was not at all
interested in further auction sale proceedings. Therefore, it
sought for a direction from the Court to the respondents for
return of the deposited amount by treating the auction
proceedings as non-est.
26 According to the third respondent, petitioner Gupta
Metallics did not deposit the balance 85% of the bid amount
which was in contravention of Condition No.3 prescribed in
Form No.7 (notice of sale of land) dated 07.12.2002. As per
Condition No.3, the purchaser was required to deposit 15% of
the purchase price at the time of sale and the balance 85%
within 30 days from the date of sale failing which the money
deposited by the purchaser would be liable to forfeiture. This is
also the requirement of Section 36 of the Revenue Recovery Act.
In view of the stay order granted by this Court, there was no
restraint on the petitioner Gupta Metallics to pay the balance
85%, which it failed to do. Petitioner having acquiesced to the
auction conducted and having failed to deposit 85% of the
balance amount as per auction condition, is estopped from
seeking refund of the 15% deposit.
10
27 Respondent No.3 has stated that in the meanwhile it
received a communication dated 06.07.2021 from M/s.
Edelweiss Asset Reconstruction Company Limited (referred to
hereinafter as "the Asset Reconstruction Company"). By the
said letter, third respondent was informed that the Asset
Reconstruction Company is the assignee of the debts of the
petitioner M/s.Gupta Metallics, which had borrowed money
from the State Bank of India and other consortium lenders. It
was mentioned that the amount of Rs.62,00,000-00 deposited
by the petitioner had appeared in its balance sheet for the year
ending 31.03.2013, over which the secured creditors were
claiming first charge. Asset Reconstruction Company informed
the third respondent that for recovery of dues from Gupta
Metallics, it had also filed O.A.No.1335 of 2016 before the Debts
Recovery Tribunal - II, Mumbai ("the Tribunal" hereinafter)
under the Recovery of Debts and Bankruptcy Act, 1993 and has
also invoked the provisions of Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (briefly, 'the SARFAESI Act' hereinafter).
28 In the above circumstances, third respondent has stated
that he is bound to remit the amount deposited by Gupta
Metallics pursuant to the auction sale to the Asset
Reconstruction Company. Question of refund of the said
amount does not arise. In any case, petitioner cannot claim 11
any refund since it failed to deposit the balance amount within
30 days from the date of sale.
29 Vinedale Distilleries got itself impleaded as respondent
No.4 in the writ petition and filed counter affidavit. In the
counter affidavit it is stated that all the directors of the
petitioner Gupta Metallics have been disqualified to hold office
with effect from 01.11.2016 till 31.10.2023 under Section 164
(2) r/w Section 167 of the Companies Act, 2013. Therefore,
none of the directors can represent the petitioner Gupta
Metallics.
30 No assessment order was passed by the Commercial
Taxes Department whereby and whereafter the tax liability of
the fourth respondent was crystallized, more particularly with
effect from 24.09.1991 when the rehabilitation scheme was
sanctioned by BIFR. That apart, when the scheme was in force
Commercial Taxes Department could not have initiated
proceedings under the Revenue Recovery Act for recovery of un-
determined, un-quantified and un-assessed arrears of sales tax
of the fourth respondent. Fourth respondent has given the
sequence of various orders passed by the revenue authorities,
which finally culminated in the order dated 14.07.2008 passed
by this Court in Special Appeal No.95/1997, setting aside the
order of the Commissioner of Commercial Taxes. Thereafter, no
assessment order was passed.
12
31 Writ Petition No.2139 of 2003 filed by the Commissioner
of Commercial Taxes was withdrawn on 08.09.2011 whereafter
first respondent issued Memo dated 04.02.2012 giving liberty to
the petitioner Gupta Metallics to pay the balance amount.
32 There were serious property disputes as regards
ownership of the fourth respondent between M/s.Sanman
Distributors Private Limited, Satish Kumar Agarwal and Anil
Agarwal, which resulted in several suits before the Delhi High
Court. In view of above, the property in question of the fourth
respondent was placed in custody of the Court Commissioner
by the Delhi High Court by order dated 13.02.1995 which was
confirmed by the Supreme Court by order dated 10.05.1995.
That being the position, Commercial Taxes Department could
not have resorted to auction sale of the properties which were
in custodia legis of the Delhi High Court.
33 Adverting to various provisions of the Revenue Recovery
Act, it is stated that no such notices were issued under the said
Act before the auction sale.
34 Additionally it is contended that first and third
respondents did not obtain valuation of the land put to auction
sale on 10.01.2003.
35 It is reiterated that petitioner Gupta Metallics had failed
to deposit the balance 85% as is the requirement under the law.
It is the stand of the petitioner Gupta Metallics itself that the 13
auction sale had become non-est and therefore the amount
deposited by it (15%) should be refunded.
36 In the meanwhile, fourth respondent has stated that it
approached the Commissioner of Commercial Taxes with the
proposal that it would deposit Rs.7,50,000-00 per month
towards whatever arrears of sales tax dues and sought for
renewal of excise license which has been accepted by the
Government. It is however contended that first respondent had
no legal authority to issue the Memo dated 04.02.2012 which
has been impugned in W.P.No.5335 of 2012. In the
circumstances fourth respondent seeks dismissal of the writ
petition.
37 Petitioner has filed two rejoinder affidavits. In the first
rejoinder affidavit to the counter affidavit of the first
respondent, it is stated that petitioner Gupta Metallics
participated in the auction conducted by the first respondent
and being the successful bidder, paid 15% of the bid amount.
As the first respondent threatened to forfeit the deposited
amount of the petitioner, it was constrained to file the present
writ petition.
38 If there is any dispute between Vinedale Distilleries and
the Commercial Taxes Department, petitioner Gupta Metallics
has nothing to do with the same. However, it is stated that
having regard to the nature of the dispute which has unfolded,
petitioner Gupta Metallics felt that it would be desirable if 14
appropriate orders are passed by the Court directing the first
respondent to refund the entire amount deposited by the
petitioner Gupta Metallics and await outcome of the litigation
pending between Vinedale Distilleries and the Commercial
Taxes Department.
39 Petitioner has also filed rejoinder affidavit to the
additional counter affidavit filed on behalf of the third
respondent. After narrating the relevant facts, including the
fact that by order dated 08.09.2011 this Court dismissed Writ
Petition No.2139 of 2003 filed by the Commercial Taxes
Department challenging the order of BIFR as infructuous on the
statement made by learned counsel for the Commercial Taxes
Department.
40 It is stated that petitioner Gupta Metallics by letters dated
11.03.2006, 11.06.2006 and 12.09.2007, had requested the
Commercial Taxes Department to confirm the sale in its favour
by accepting 85% of the purchase price. But there was no
response. Hence it is contended that the allegation made by
the answering respondent that petitioner did not take any steps
for confirmation of sale by depositing the remaining amount is
not correct. As a matter of fact, in view of the order dated
16.01.2003 of BIFR and categorical refusal by the Commercial
Taxes Department to accept the payment of balance amount by
the petitioner, question of non-payment of the 85% of the sale
price by the petitioner does not arise. In the circumstances the 15
State is not entitled to forfeit the amount deposited by the
petitioner.
41 Regarding the additional counter affidavit filed by the
third respondent, it is stated that the Commercial Taxes
Department has changed its stand after 18 long years and is
now supporting the defaulter which is difficult to comprehend.
According to the petitioner, Commercial Taxes Department had
induced it to participate in the auction sale and collected
Rs.61,80,000-00 in the year 2003 with the assurance to
confirm the sale. But, instead, petitioner has been made to
suffer for the last 18 years for various reasons which are totally
unconnected to the petitioner.
W.P.No.5335 of 2012:
42 This petition has been filed by M/s.Sanman Distributors
Private Limited and Vinedale Distilleries as the petitioners. It is
stated that Mr.Shiv Shankar Sanyal, Director of M/s.Sanman
Distributors Private Limited was appointed by the Delhi High
Court to represent Vinedale Distilleries. In this proceeding the
two petitioners seek quashing of Memo dated 04.02.2012,
issued by the second respondent i.e. Principal Secretary to the
then Government of Andhra Pradesh, Revenue Department for
recovering the dues from Vinedale Distilleries by proceeding
with confirmation sale of the auctioned property in favour of the
fifth respondent i.e. Gupta Metallics. This petition also seeks
quashing of sale notice dated 18.12.2002 and thereby to nullify 16
the auction proceedings of the properties belonging to Vinedale
Distilleries.
43 It is stated that Vinedale Distilleries had defaulted in
payment of commercial tax dues which were sought to be
recovered by respondent Nos.1 and 2 by taking coercive steps
in respect of the immovable properties of Vinedale Distilleries.
It is further stated that ownership of the assets belonging to
Vinedale Distilleries is the subject matter of dispute before the
Delhi High Court, which has appointed Court Commissioners to
protect and preserve the assets of Vinedale Distilleries.
Though allegations have been made against the Court
Commissioners as acting against the interest of Vinedale
Distilleries, it may not be necessary for us to enter into the
above aspect in view of the nature of the lis which is before us.
However, it is contended that Delhi High Court is the custodia
legis of the properties of Vinedale Distilleries.
44 Petitioners have given a brief background of the
ownership dispute of Vinedale Distilleries and how the matter
has reached Delhi High Court as well as BIFR under the 1985
Act.
45 Notwithstanding the fact that matter relating to revival of
Vinedale Distilleries was before BIFR, first respondent i.e.
Commissioner of Commercial Taxes issued notice for sale of the
properties belonging to Vinedale Distilleries for recovering
alleged outstanding dues. Therefore, BIFR passed an order on 17
16.01.2003 staying sale of the properties undertaken by the
first respondent being in violation of Section 22 (1) of the 1985
Act.
46 First respondent filed writ petition before this Court for
setting aside the order of BIFR dated 16.01.2003. But the said
order was neither vacated nor stayed by the High Court.
47 In the meanwhile, the auction purchaser i.e. fifth
respondent - Gupta Metallics filed an application before the
first respondent in April, 2003 for withdrawal of its bid and for
return of the amount deposited.
48 However, the writ petition filed by the first respondent
against the order dated 16.01.2003 passed by BIFR was
withdrawn.
49 Second respondent i.e. Principal Secretary to the then
Government of Andhra Pradesh, Revenue Department issued
the impugned Memo dated 04.02.2012 calling upon the first
respondent to confirm the sale in favour of Gupta Metallics. It
is this Memo which has been impugned in the present writ
petition.
50 This Court, by order dated 05.03.2012, admitted the writ
petition for hearing and passed an interim order directing the
first respondent not to pass orders or to take steps to confirm
the sale of the schedule property in favour of Gupta Metallics. 18
51 Respondent Nos.1 and 2 have filed a common affidavit
through Smt. Neetu K. Prasad, Commissioner of Commercial
Taxes, Government of Telangana.
52 Putting the facts in perspective, answering respondents
have stated that Vinedale Distilleries was a registered dealer
under the Andhra Pradesh General Sales Tax Act, 1957. It was
carrying on the business of production and sale of alcoholic
products. However, it became a sick company whereafter it
registered itself with the BIFR in Case No.70/1989. After
declaring it as a sick industrial company, BIFR sanctioned
scheme of rehabilitation on 24.09.1991. Two groups of
shareholders i.e. M/s. Agarwal Group and M/s. Sanman Group
tried to take over control of Vinedale Distilleries which led to lot
of litigation and counter litigation.
53 Vinedale Distilleries was required to pay large sums of
money to the Commercial Taxes Department on account of
outstanding commercial tax dues for the period prior to
24.09.1991 and also for the period after 24.09.1991.
Commercial Taxes Department took several steps for recovery of
the outstanding dues with intermittent litigation in between at
the instance of Vinedale Distilleries. Be that as it may,
according to the answering respondents, the outstanding dues
of Vinedale Distilleries for the period prior ro 24.09.1991 was
Rs.1,20,18,809-00 and for the period after 24.09.1991 it was
Rs.3,39,35,129-00, aggregating to Rs.4,59,53,738-00. 19
54 It is stated that Commercial Taxes Department had
obtained permission from the BIFR to recover the commercial
tax dues of Vinedale Distilleries for the post sanctioned period
i.e. for the period after 24.09.1991. Thereafter notice for sale
was issued on 07.12.2002 in Form No.7 and on 18.12.2002 in
Form No.7A for sale of the immovable properties of Vinedale
Distilleries consisting of Ac.67-13 guntas of land in Sy.Nos.57
to 65, 68 (A) and 86 (AA) of Gaganpahad village, Rajendranagar
Mandal, Ranga Reddy District.
55 Referring to Condition No.3 in Form No.7 dated
07.12.2002, it is stated that as per the said Condition, the
purchaser would be required to deposit 15% of the purchase
price at the time of sale and if the purchaser failed to pay the
remainder of the purchase price within 30 days from the date of
sale, the money deposited by the purchaser would be liable to
forfeiture.
56 On 10.01.2003, the aforesaid property was auctioned in
which Gupta Metallics i.e. fifth respondent was the highest
bidder quoting Rs.31.50 lakhs per acre for Ac.13.5 guntas of
land in Sy.Nos.58 and 59. The total value of the bid was
Rs.4,11,75,000-00. Gupta Metallics deposited Rs.61,80,000-00
by way of bankers cheques on the same day i.e. 10.01.2003
being 15% of the sale price.
20
57 However, BIFR passed an order dated 16.01.2003 staying
the execution of sale of land belonging to Vinedale Distilleries
auctioned on 10.01.2003.
58 Against the order of BIFR dated 16.01.2003, Commercial
Taxes Department filed Writ Petition No.2139 of 2003 before
this Court. By orders dated 10.02.2003 and 24.02.2003, this
Court clarified that confirmation of sale if any would be subject
to result of the writ petition.
59 Writ Petition No.2139 of 2003 was dismissed as
infructuous on 08.09.2011 as BIFR had disposed of the case
before it i.e. Case No.70 of 1989 on 10.04.2006 on account of
Dena Bank taking over possession of the assets of Vinedale
Distilleries on 26.01.2006 under the SARFAESI Act.
60 Thereafter, reference has been made to the Writ Petition
No.2353 of 2003 filed by Gupta Metallics before this Court.
Respondent Nos.1 and 2 have stated that even though there
was no restraint on Gupta Metallics to pay the remaining 85%
of the bid amount, it did not pay the same.
61 It is further stated that Gupta Metallics had taken a stand
in W.P.No.2353 of 2003 that the amount deposited by it should
be returned. According to the answering respondents, Gupta
Metallics having participated in the auction conducted under
the Revenue Recovery Act and thereafter having failed to
deposit the balance 85% of the sale amount is estopped from 21
seeking refund of the deposited amount. State would be within
its right to forfeit the amount deposited by Gupta Metallics.
62 After disposal of W.P.No.2139 of 2003 on 08.09.2011,
Government had issued Memo dated 04.02.2012 requesting the
Commissioner of Commercial Taxes to take necessary steps to
confirm the sale by collecting the balance 85% of the sale
amount with interest. It is this order which is under
impugnment in the present proceeding.
63 However, this Court by order dated 05.03.2012 restrained
the Government from passing order(s) or from taking steps to
confirm the sale of the schedule property in favour of Gupta
Metallics.
64 Answering respondents have stated that in view of the
provisions of the Revenue Recovery Act and conditions
prescribed in Form No.7 and as Gupta Metallics had failed to
comply with such conditions by not paying the remaining 85%
of the sale amount within the stipulated period of 30 days, the
auction sale proceedings have failed. In the circumstances the
Government Memo dated 04.02.2012 pales into insignificance
and no right whatsoever can accrue on the basis of the said
Memo. Question of confirmation of sale in favour of Gupta
Metallics does not arise. The only question that may fall for
consideration is whether Gupta Metallics would be entitled to
refund of the forfeited amount.
22
65 In the meanwhile, the Asset Reconstruction Company
sent a communication dated 06.07.2021 to the Commissioner
of Commercial Taxes informing him that it is the assignee of the
debts of Gupta Metallics which it had borrowed from State
Bank of India and other lenders. It is further stated that the
Asset Reconstruction Company has initiated action against
Gupta Metallics under the SARFAESI Act. In the
circumstances, it is contended that the amount deposited by
Gupta Metallics in the auction sale should be transferred to the
Asset Reconstruction Company on account of the dues of
Gupta Metallics. Therefore, answering respondents have stated
that they would be bound under the law to release the said
amount in favour of the Asset Reconstruction Company.
66 Finally, the answering respondents have stated that
Vinedale Distilleries through Mahalaxmi Hyderabad Projects
LLP has now come forward to pay all the commercial tax
arrears along with interest amounting to Rs.21.75 Crores (Tax:
Rs.4-37 Crores and Interest: Rs.17.38 Crores)
67 Gupta Metallics i.e. fifth respondent has filed counter
affidavit. After narrating and reiterating the facts, it is
contended that Gupta Metallics had participated in a statutory
auction and became the successful bidder. Therefore, it is
entitled to confirmation of sale. There was no default on the
part of Gupta Metallics as it had offered the balance sale
consideration of 85% by way of demand drafts. Since the 23
proceedings before BIFR stood abated, the bar under Section 22
of the 1985 Act would no longer apply. Therefore, the auction
held on 10.01.2003 can be confirmed by the State Government.
Gupta Metallics, facing SARFAESI proceedings at the hands of
the secured creditors, cannot in any manner influence or effect
the auction sale conducted by the State on 10.01.2003 for
recovery of the dues of Vinedale Distilleries. In the
circumstances, Gupta Metallics seeks dismissal of the writ
petition.
68 Gupta Metallics has also filed a reply affidavit to the
counter affidavit of respondent Nos.1 and 2. It has questioned
the stand taken by respondent Nos.1 and 2 as being contrary to
the Government Memo dated 04.02.2012. It has alleged that
the change of stand of the State is on account of wholly
extraneous reasons.
69 Petitioners have filed a detailed reply affidavit to the
counter affidavit filed by the fifth respondent i.e. Gupta
Metallics to which rejoinder has been filed by Gupta Metallics.
70 Gupta Metallics i.e. fifth respondent has also submitted
brief written submissions.
W.P.No.13206 of 2021:
71 Eighteen years after filing of Writ Petition No.2353 of
2003, Gupta Metallics has again approached this Court by
filing the present writ petition for a direction to respondent 24
Nos.1 and 2 to consider his representation dated 31.05.2021
and also to take steps to protect the auctioned land of which
petitioner - Gupta Metallics was the successful bidder.
72 After narrating the facts upto filing of Writ Petition
No.5335 of 2012 by Sanman Distributors and Vinedale
Distilleries, it is stated that till a decision is rendered by this
Court in W.P.Nos.2353 of 2003 and 5335 of 2012, respondent
Nos.1 and 2 have to protect the above property from
encroachment by third parties and not allow any activity on the
said land by anybody including by Sanman Distributors and
Vinedale Distilleries. It is stated that Gupta Metallics had
submitted a representation dated 31.05.2021 to respondent
Nos.1 and 2 in this regard. But there has been no response by
the said respondents. Aggrieved, present writ petition has been
filed seeking the reliefs as indicated above.
73 Respondent Nos.1 and 2 have filed a common counter
affidavit through Smt. Neetu K. Prasad, Commissioner of
Commercial Taxes, Government of Telangana. Again the
answering respondents have narrated the facts upto filing of
Writ Petition No.5335 of 2012. In fact, the present counter
affidavit is identical to the counter affidavit filed by the
answering respondents in W.P.No.5335 of 2012.
74 However, it is stated that petitioner, having failed to
comply with the condition for payment of balance 85% of the
sale price within the stipulated period of 30 days, the auction 25
proceedings had lapsed. Answering respondents would assert
their right to forfeit the amount deposited by the petitioner-
Gupta Metallics. Gupta Metallics has no enforceable right to
demand refund of the amount deposited. However, allegation
made by Gupta Metallics regarding encroachment over the
auctioned property has been denied.
75 Respondent No.4 - Vinedale Distilleries has also filed
counter affidavit. Subject counter affidavit of Vinedale
Distilleries is identical to the counter affidavit filed in
W.P.No.2353 of 2003 and the stand taken in W.P.No.5335 of
2012 as the petitioner.
76 Vinedale Distilleries has asserted that Gupta Metallics
was never a bona fide bidder. This would be borne out by the
fact that it had failed to pay the balance 85% of sale price
within the stipulated period of 30 days. Contention that
auctioned property is in the custody of respondent Nos.1 and 2
has been denied. It is stated that the said property was never
attached nor possession thereof was taken over by respondent
Nos.1 and 2. Vinedale Distilleries is still in possession over the
said property.
77 Insofar submission of representation dated 31.05.2021 by
Gupta Metallics is concerned, it is stated that the same was
filed only as a ground work for filing the present writ petition. 26
78 It is stated that there has been a change of management
of Vinedale Distilleries. Consequently, all pending inter se
disputes have been resolved and closed. Now Sanman
Distributors alone owns 100% shareholding in Vinedale
Distilleries. The new management is committed to clear all
outstanding tax dues of Vinedale Distilleries.
Submissions:
79 Mr.Srinivas, learned senior counsel appearing for
Vinedale Distilleries submits that Gupta Metallics had paid only
15% of the sale amount and did not pay the balance 85% of the
same. Therefore, Gupta Metallics is only a bidder and cannot
be construed as purchaser. Under Section 36 of the Revenue
Recovery Act, the auction has not only failed but the amount
deposited by Gupta Metallics is liable to forfeiture.
79.1 Learned senior counsel has raised various
objections to the auction sale, such as, there being no
assessment order for claiming arrears of tax. Secondly, the
procedure prescribed under the Revenue Recovery Act for
holding of auction sale, including the requirement for 30 days
notice period which has vitiated the impugned auction sale.
However, according to him all these aspects may not be gone
into as it is sufficient for declaring the auction sale as having
failed in view of contravention of Section 36 of the Revenue
Recovery Act.
27
79.2 Insofar contention of Gupta Metallics is concerned,
he submits that in the first writ petition i.e. W.P.No.2353 of
2003, Gupta Metallics had sought a direction from the High
Court for refund of the 15% bid amount deposited by it and to
declare the auction sale as non-est and illegal. In contradiction
to this stand, Gupta Metallics, in W.P.No.13206 of 2021, has
sought for a direction to the State respondent i.e. Commercial
Taxes Department to protect and preserve the auctioned
property and not to allow any construction thereon. Such
contradictory stands cannot go together.
79.3 Mr.Srinivas submits that there were corporate
issues plaguing Vinedale Distilleries as to its control and
management for a long time. Now those issues have been
sorted out and Sanman Distributors is 100% in control of
Vinedale Distilleries.
79.4 Mr. Srinivas further submits that Vinedale
Distilleries has now come forward to pay all the commercial tax
arrears along with interest amounting to a total figure of
Rs.21,75,00,000-00. Since the auction has failed which is
admitted by the State respondents, there can be no embargo on
the said respondents in accepting the aforesaid amount from
Vinedale Distilleries which will put a quietus to all the disputes.
In any case, Gupta Metallics is now facing action at the hands
of the Asset Reconstruction Company under the SARFAESI Act.
Therefore, it is in no position to pay the balance amount as per 28
the auction sale, which in any event is not legally permissible.
On the other hand, the amount deposited by it is liable to be
forfeited because of non-compliance to the provisions of Section
36 of the Revenue Recovery Act. Even if a liberal view is taken
and forfeiture is not insisted upon, the aforesaid deposited
amount is liable to be appropriated by the Asset Reconstruction
Company as part of the recovery of outstanding dues of Gupta
Metallics under the SARFAESI Act.
80 Mr.B.S.Prasad, learned senior counsel and Advocate
General for the State of Telangana submits on behalf of the
State respondents that the stand of the State has been
consistent right from the beginning from the first affidavit filed
by the Commissioner of Commercial Taxes in W.P.No.2353 of
2003. He submits that Commercial Taxes Department took
steps to recover the arrear tax amount of Vinedale Distilleries
post rehabilitation plan framed by BIFR dated 24.09.1991,
which worked out to approximately Rs.3,39,00,000-00. After
following the due process, public auction for sale of land
belonging to Vinedale Distilleries was resorted to. In the public
auction held on 10.01.2003, Gupta Metallics emerged as the
highest bidder in respect of the land admeasuring Ac.13-50
located at Sy.Nos.58 and 59 for a total amount of
Rs.4,11,75,000-00. Gupta Metallics paid 15% of the aforesaid
amount on 10.01.2003 itself by way of bankers cheques
totaling to Rs.61,80,000-00. In the meanwhile, BIFR passed 29
order dated 16.01.2003 staying execution of the sale of the
auctioned land. Though State had filed a writ petition before
this Court challenging the aforesaid order dated 16.01.2003,
there was no stay granted by this Court; rather it was directed
that any confirmation of sale would be subject to further orders
of the Court.
80.1 Mr. Prasad further submits that in the subsequent
affidavit (additional affidavit) Commercial Taxes Department
has taken the stand that Gupta Metallics was not at all
interested in further proceedings of auction sale. It did not
deposit the balance 85% within 30 days which was in
contravention of Condition No.3 prescribed in the notice for sale
of land as well as Section 36 of the Revenue Recovery Act. After
this Court had stayed forfeiture of the amount deposited, there
was no restraint on Gupta Metallics to pay the balance 85%,
which it failed to do.
80.2 On the other hand, Commercial Taxes Department
was informed by the Asset Reconstruction Company on
06.07.2021 that it is the assignee of the debts of Gupta
Metallics which had borrowed heavily from State Bank of India
and other consortium lenders. Gupta Metallics is facing
proceedings before the Tribunal under the Recovery of Debts
and Bankruptcy Act, 1993 as well as under the SARFAESI Act.
Therefore, Commercial Taxes Department has been called upon 30
to remit the deposited amount to the Asset Reconstruction
Company.
80.3 Learned Advocate General submits that even after
the writ petition filed by the State against the order of BIFR was
withdrawn on 08.09.2011, Gupta Metallics did not pay the
balance 85%.
80.4 Learned Advocate General points out that this stand
has been reiterated by the Commercial Taxes Department in the
other two writ petitions as well. Though Principal Secretary to
the then Government of Andhra Pradesh, Revenue Department,
had issued Memo dated 04.02.2012 calling upon the
Commissioner of Commercial Taxes to confirm the sale in
favour of Gupta Metallics by collecting the balance 85% of the
sale amount with interest, this Court passed an interim order
on 05.03.2012 restraining the State from taking steps to
confirm the sale in favour of Gupta Metallics. He categorically
submits that in view of the provisions of the Revenue Recovery
Act and Condition No.3 in Form No.7 and as Gupta Metallics
had failed to comply with such condition by depositing the
balance 85% of the sale amount within the stipulated period of
30 days, the auction proceedings had failed. This is the
categorical and clear stand of the State. In the circumstances
the Government Memo dated 04.02.2012 would have no legal
consequence.
31
80.5 In the event it is directed to release/refund the
amount deposited by Gupta Metallics, Commercial Tax
Department is bound to act in accordance with law and would
have to release the said amount in favour of the Asset
Reconstruction Company in view of Gupta Metallics facing
action under the Recovery of Debts and Bankruptcy Act, 1993
as well as under the SARFAESI Act.
80.6 Finally, learned Advocate General submits that
State may now work out payment of outstanding dues by
Vinedale Distilleries since it has come forward to pay the same
together with interest.
81 Sri B.Adinarayana Rao, learned senior counsel appearing
for Gupta Metallics at the outset submits that it is astonished
to find the State singing the same tune as that of the tax
defaulter. Instead of punishing the defaulter, it has taken a
stand which is likely to benefit the tax defaulter i.e. Vinedale
Distilleries by agreeing to consider its request for payment of
the outstanding dues at this distant point of time.
81.1 Adverting to the relevant facts, learned senior
counsel submits that auction was held on 10.01.2003. After
being declared the successful bidder Gupta Metallics
immediately deposited 15% of the bid amount. Before expiry of
the 30 days window period for deposit of the balance 85%, BIFR
passed an order on 16.01.2003 staying the auction sale. In 32
view of such stay, Commercial Taxes Department did not accept
payment of the balance 85%. In the first writ petition filed by
Gupta Metallics this Court directed the Commercial Taxes
Department not to forfeit the 15% amount deposited by Gupta
Metallics.
81.2 Special Standing Counsel of the Commercial Taxes
Department by letter dated 12.09.2011 had informed the said
department that it could now proceed with the confirmation of
sale after receiving the balance consideration with applicable
interest. Consequent thereto the State Government issued
Memo dated 04.02.2012 calling upon the Commissioner of
Commercial Taxes to confirm the sale after collecting the
balance 85% of the tax dues together with interest from
10.02.2003 till actual payment. However, this Memo has been
stayed by this Court in W.P.No.5335 of 2012 filed by Vinedale
Distilleries and another.
81.3 Mr.B.Adinarayana Rao, learned senior counsel for
Gupta Metallics submits that due process of law was followed
in conducting the auction. Gupta Metallics could not deposit
85% within the stipulated period due to the stay order of BIFR.
Vinedale Distilleries did not file any application under Section
38 of the Revenue Recovery Act to set aside the auction sale.
He submits that W.P.No.5335 of 2012 filed by Vinedale
Distilleries is nothing but a gross abuse of the process of the
Court. The auction sale was conducted on 10.01.2003. Nine 33
years thereafter the said writ petition came to be filed to declare
the auction sale as null and void. On the ground of delay and
laches itself W.P.No.5335 of 2012 should be dismissed.
Analysis:
82 Submissions made by learned counsel for the parties have
received the due consideration of the Court. Also perused the
materials on record and the cited judgments.
83 From the materials on record, we find that the Collector of
Ranga Reddy district had published notice of sale of land in
Form No.7 (Section 36) on 07.12.2002 in the Ranga Reddy
District Gazette. It was notified thereunder that the surplus
land belonging to Vinedale Distilleries would be sold by public
auction on 10.01.2003 at 11.00 AM for recovery of arrears of
sales tax and revenue default. As per paragraph No.3 of the
said Form No.7 it was mentioned that the purchaser would be
required to deposit 15% of the purchase money at the time of
sale and if it failed to pay the remainder of the purchase money
within 30 days from the date of sale, the money deposited by it
would be liable to forfeiture. In the said notice of sale the name
of the defaulter was mentioned as Vinedale Distilleries.
84 This notice of sale in Form No.7 was followed by another
notice of sale issued by the Collector of Ranga Reddy District in
Form No.7A on 18.12.2002. While mentioning the date of sale
as 10.01.2003, names of the defaulters were mentioned too. 34
85 As already noted above, the auction sale was conducted
on 10.01.2003 in which Gupta Metallics emerged as the highest
bidder in respect of land admeasuring Ac.13-50 located at
Sy.Nos.58 and 59 of Ganganpahad village of Rajendranagar
Mandal in Ranga Reddy District for a total sale consideration of
Rs.4,11,75,000-00. Gupta Metallics deposited 15% of the
aforesaid amount i.e. Rs.61,80,000-00 on 10.01.2003.
86 BIFR in Case No.70/1989 passed an order on 16.01.2003.
It was noted that Vinedale Distilleries was declared as sick
industrial company under Section 3 (1) (0) of the 1985 Act on
10.12.1989. Thereafter a scheme for rehabilitation of Vinedale
Distilleries was sanctioned by BIFR on 24.09.1991. While the
scheme was declared failed on 23.02.2001, BIFR had appointed
Industrial Development Bank of India (IDBI) as the Operating
Agency under Section 17 (3) of the 1985 Act. When steps for
change in the management of Vinedale Distilleries were under
consideration, the auction sale was held on 10.01.2003, which
was in violation of Section 22(1) of the 1985 Act, having
overriding effect over other laws. It was held that provisions of
the 1985 Act would take precedence over the Revenue Recovery
Act; recovery proceedings could not have been initiated without
the approval of the BIFR. It is in such circumstances that
BIFR directed stay of execution of the sale of the land.
87 This order was challenged by the State before this Court
by filing W.P.No.2139 of 2003. This Court passed an order on 35
06.02.2003 directing the State that any confirmation of sale
would be subject to further orders of the Court. Thus, it is
evident that this Court did not stay the auction sale
proceedings. It had only made it clear that any confirmation of
sale would be subject to further orders of the Court. Therefore,
there was no impediment for Gupta Metallics to deposit the
balance 85% of the sale amount.
88 It appears that Dena Bank had taken over possession of
the assets of Vinedale Distilleries under Section 13 (4) of the
SARFAESI Act. In the circumstances BIFR passed an order on
10.04.2006 holding that BIFR could not proceed further in the
matter and therefore the reference pending before it stood
abated in terms of the third proviso to Section 15 (1) of the
1985 Act, as amended. In view of the aforesaid development,
W.P.No.2139 of 2003 was withdrawn by the State on
08.09.2011.
89 We find from the materials on record that Commissioner
of Commercial Taxes had written to the then Principal Secretary
to the Government of Andhra Pradesh (Revenue Department) on
14.12.2011 seeking guidance from the Government whether to
confirm the auction sale by collecting the balance 85% of sale
price. The Principal Secretary, vide Memo dated 04.02.2012
informed the Commissioner of Commercial Taxes that as per
Section 16 of the Andhra Pradesh General Clauses Act, 1957
and Section 22 of the Andhra Pradesh Value Added Tax Act, 36
2005, if any dealer fails to pay the tax due or fails to pay any
tax assessed or penalty levied within the time prescribed, he
shall pay, in addition to the amount of such tax or penalty that
may be calculated at the rate of one percent per month for the
period of default. Therefore, Commissioner of Commercial
Taxes was requested to take necessary action and to confirm
the sale by collecting the balance 85% of the tax dues and
interest from 10.02.2003 till actual payment of the tax dues.
90 This has been assailed by Vinedale Distilleries in
W.P.No.5335 of 2012. This Court by order dated
05.03.2012 had admitted the writ petition and passed an
interim order directing the State not to pass orders or to
take steps to confirm the sale of the schedule property in
favour of Gupta Metallics.
91 Having noticed the above, we may advert to Section
36 of the Revenue Recovery Act. The same reads as under:
36. Procedure in sale of immovable property:- In the sale of immovable property under this Act the following rules shall be observed.
First-Publication:- The sale shall be by public auction to the highest bidder. The time and place of sale shall be fixed by the Collector of the district in which the property is situated, or other officer empowered by the Collector in that behalf. The time may be either previous to or after the expiration of the fasli year.
Second-Notification one month before sale:- Previous to the sale the Collector, or other officer empowered by the Collector in that behalf, shall issue a notice thereof in English and in the language of the district, specifying the name of the defaulter; the position and extent of land and of his buildings thereon; the amount of revenue assessed on the land, or upon its different sections; the proportion of the public revenue due during the remainder of the current fasli; and the time, place, and conditions of sale. This notice shall be fixed up one month at least before the sale in the 37
Collector's office and in the Taluk cutcherry, in the nearest police station-house, and on some conspicuous part of the land.
Third-Deposit by purchaser:- A sum of money equal to fifteen per cent of the price of the land shall be deposited by the purchaser in the hands of the Collector, or other officer empowered by the Collector in that behalf, at the time of the purchase, and where the remainder of the purchase-money may not be paid within thirty days, the money so deposited shall be liable to forfeiture.
Fourth-Re-sale in default of payment:- Where the purchaser may refuse or omit to deposit the said sum of money, or to complete the payment of the remaining purchase-money, the property shall be resold at the expense and hazard of such purchaser, and the amount of all loss or expense which may attend such refusal or omission shall be recoverable from such purchaser in the same manner as arrears of public revenue. Where the lands may, on the second sale, sell for a higher price than at the first sale, the difference or increase shall be the property of him on whose account the said first sale was made.
Fifth-Agents to name principals:- All persons bidding at a sale may be required to state whether they are bidding on their own behalf or as agents, and, in the latter case, to deposit a written authority signed by their principals. If such requisition be not complied with, their bids may be rejected.
92 Thus Section 36 envisages five stages in the sale of
immovable property. As per the first stage, the sale should
be by a public auction to the highest bidder. The second
stage provides for issuance of notice notifying the details
which should be fixed up one month at least before the
sale. As per the third stage, a sum of money equal to 15%
of the price of the land shall be deposited by the purchaser
to the Collector or to the empowered officer at the time of
purchase. If the remainder of the purchase money is not
paid within 30 days, the money so deposited shall be liable
to forfeiture. The fourth stage envisages a situation where
the purchaser fails to deposit the 15% or to comply with
the payment of remaining purchase money. In such a
situation the property should be resold at the expense and 38
hazard of the purchaser. The fifth stage requires the
bidders to declare whether they are bidding on their own
behalf or as agents.
93 Section 38 of the Revenue Recovery Act provides that
an application may be made to the Collector to set aside
sale at any time within thirty days from the date of sale of
the immovable property. Such application may be filed on
the ground of some material irregularity or mistake or
fraud in publishing the sale notice or conducting the sale.
Under sub-Section (3) of Section 38, on expiry of the period
of thirty days from the date of sale, the Collector shall
make an order confirming the sale.
94 In the instant case what we find is that while Gupta
Metallics had paid 15% of the sale price on the date of
auction i.e. on 10.01.2003, but it did not pay the balance
85% within 30 days from the date of sale. Though it may
be contended that the order dated 16.01.2003 passed by
BIFR staying the auction sale had come in the meanwhile
and it prevented Gupta Metallics from depositing the
balance 85%, the fact remains that in W.P.No.2139 of 2003
filed by the State challenging the order dated 16.01.2003,
this Court, by order dated 06.02.2003 clarified that any
confirmation of sale would be subject to orders of this 39
Court. Therefore, there was no legal impediment for Gupta
Metallics to make payment of the balance 85%. Though
Gupta Metallics has taken a stand that it had come
forward to pay the balance 85%, which was not accepted
by the State, the fact remains that the said amount was
not deposited by Gupta Metallics. There was no
application by Gupta Metallics before this Court seeking a
direction to the State to accept the balance 85% of the sale
price which would have been subject to outcome of the writ
petition. In the absence of the same, we are afraid law will
take its own course. We have already seen that as per
paragraph No.3 of the notice of sale in Form No.7, the
purchaser is required to deposit 15% of sale price on the
date of sale and the remainder 85% within 30 days from
the date of sale, failing which the auction sale would be
construed as having failed. This provision can be traced to
the third stage envisaged by Section 36 of the Revenue
Recovery Act, which says that when the remainder of the
purchase money is not paid within 30 days, the money so
deposited shall be liable to forfeiture.
95 Having noticed the above, we may first advert to the
stand of Gupta Metallics in W.P.No.2353 of 2003 and
W.P.No.13206 of 2021. In the first case, a direction has
been sought for against the State not to forfeit the deposit 40
of 15% made by it. On the other hand, in W.P.No.13206 of
2021 Gupta Metallics has sought for a direction to the
State to consider its representation dated 31.05.2021 and
to take steps for protection of the auctioned land. The
representation dated 31.05.2021 pertains to alleged
encroachment by third parties on the auctioned land. As
already noticed above in none of the two writ petitions
Gupta Metallics made any statement or sought for any
order from the Court for deposit of the balance 85% of the
sale price subject to outcome of the two writ petitions.
Therefore, we are of the view that Gupta Metallics cannot
insist on taking the auction sale held on 10.012003 to its
logical conclusion by allowing it to pay the balance amount
at this stage after 18 years and thereafter to confirm the
sale. In our considered view such a contention is wholly
untenable and is liable to be rejected.
96 As we have already discussed, Gupta Metallics had
not paid the remaining 85% of the sale price within the
prescribed period, in contravention of paragraph No.3 of
Form No.7 Notice dated 07.12.2002 as well as in terms of
Section 36 of the Revenue Recovery Act. That being the
position, the auction sale had failed.
41
97 In Manilal Mohanlal Shah Vs. Sardar Sayed Ahmed
Sayed Mahmad1 Supreme Court held that the full amount
of purchase money must be paid within the prescribed
period which is the mandatory requirement. Unless the
deposit and the payment are made as required by the
mandatory provisions, there would be no sale in the eye of
law in favour of the defaulting purchaser and there would
be no right to own and possess the property by him. This
has been the consistent view of the Supreme Court. The
obligation of the purchaser to deposit the full purchase
price within the prescribed time is a mandatory
requirement and non-compliance thereto would render the
sale a nullity. (Shilpa Shares and Securities Vs. National
Co-operative Bank Limited2). Again in C.N. Paramsivam
vs. Sunrise Plaza Tr. Partner3, while considering the
provisions of Rules 57 and 58 of the Income Tax Rules,
1962, Supreme Court held that a breach of the
requirements under those rules would render the auction
non-est in the eye of law.
98 Insofar W.P.No.5335 of 2012 is concerned, the Memo
dated 04.02.2012 of the then Principal Secretary of the
Government of Andhra Pradesh cannot survive in view of
1 AIR 1954 SC 349 2 2007 12 SCC 165 3 AIR 2013 SC 2941 42
what we have discussed above. In any case, the State
itself has taken a categorical stand in the said writ petition
by filing counter affidavit that in view of failure of Gupta
Metallics to pay the remaining 85% of the sale amount
within the stipulated period, the auction proceedings had
failed. In fact, this has been the consistent stand of the
State in all the three writ petitions. Thus, the Government
Memo dated 04.02.2012 pales into insignificance and no
right whatsoever can accrue on the basis of the said Memo.
Therefore, in view of what we have discussed above, we
concur with the stand of the State that the Government
Memo dated 04.02.2012 has no legal consequence though
it would have been better if the State itself had sought
leave of the Court to withdraw the said Memo dated
04.02.2012.
99 As to challenge to the auction sale held on
10.01.2003 by Vinedale Distilleries is concerned, we find
that the challenge was made after nine years in 2012.
There is no explanation for such belated challenge.
Therefore, it would not be just and proper to examine the
legality and validity of the auction sale and the preceding
sale notice at this distant point of time. In any case, such
a challenge has only become academic in view of what we 43
have discussed above holding that the auction sale has
failed.
100 Though learned senior counsel for Gupta Metallics
argued that Vinedale Distilleries did not file any application
under Section 38 of the Revenue Recovery Act, we are of
the view that we need not enter into this aspect of the
matter in view of what we have discussed above. Even
otherwise, the said provision providing for filing of
application to set aside the auction sale, may not be
applicable insofar the present case is concerned, inasmuch
as there was no concluded sale. Gupta Metallics had only
deposited 15% of the sale price. Till the full sale price was
not paid, it could not be termed as the purchaser and the
sale was not complete; its status remained nebulous at
best. In such circumstances, it was not necessary to file
application for setting aside the sale.
101 Having reached the conclusion as above, we are of the
view that the question as to whether the 15% deposit made
by Gupta Metallics pursuant to the auction sale held on
10.01.2003 is liable to be forfeited or not and if not,
whether it should be refunded to Gupta Metallics or to the
secured creditor (Asset Reconstruction Company) since
Gupta Metallics is facing proceedings under the Recovery of 44
Debts and Bankruptcy Act, 1993 as well as under the
SARFAESI Act, should be left to the Commissioner of
Commercial Taxes to take a decision. Furthermore, since the
auction has failed, there is no legal impediment for the
Commercial Taxes Department in accepting the proposal of
Vinedale Distilleries to clear the outstanding tax dues together
with interest by taking a reasoned decision. This is because the
right of Vinedale Distilleries to redeem the property by paying
the outstanding dues would subsist till the property is auction
sold.
Decision:
102 In the light of the above discussions, we issue the
following directions:
i. Commissioner of Commercial Taxes Department, Telangana, shall take a decision as to whether 15% of the sale price deposited by Gupta Metallics on 10.01.2003 is liable to be forfeited or not?
ii. If the decision is in the negative, the Commissioner shall take a further decision as to whether the said amount should be refunded to Gupta Metallics or to the secured creditor represented by the Asset Reconstruction Company?
iii. Let the above decision Nos.1 and 2 be taken by the Commissioner of Commercial Taxes within a period of eight weeks from the date of receipt of a copy of this order after affording an opportunity of hearing to Gupta Metallics as well as to the Asset Reconstruction Company.
45
iv. Commissioner of Commercial Taxes Department shall also consider the proposal of Vinedale Distilleries to pay the outstanding tax arrears together with applicable interest after hearing Vinedale Distilleries and thereafter passing a reasoned order within a period of four weeks from the date of receipt of a copy of this order.
103 In view of the aforesaid directions, W.P.Nos.2353 of
2003 and 13206 of 2021 are dismissed, whereas,
W.P.No.5335 of 2012 is disposed of in the above terms. No
order as to costs. Miscellaneous petitions, if any, pending
in these writ petitions shall stand closed.
___________________ UJJAL BHUYAN, J
________________________________ Dr.CHILLAKUR SUMALATHA, J
Date: 04.01.2022.
Kvsn
