@JUDGMENTTAG-ORDER
Sanjay Yadav, J.@mdashPetitioner, a registered Private Limited Company under the Companies Act, 1956, purchaser of plot No. 21 B, 22 Aat Sector ''G'' and 24/3 at Sector ''D'', Industrial Area, J.K. Road, Govindpura, Bhopal being the land and building and plant and machinery thereon measuring 37000 sq. ft. office building, factory shed and 31800 sq. ft. machine and fabrication shop total being 68800 sq. ft. The said plots, having been purchased for Rs. 1.30 crores, of which an amount of Rs. 60 lakhs were deposited, has raised a grievance vide this writ petition that, despite of his being a bona fide purchaser and being willing to pay the remaining amount, has been subjected to a coercive action by the respondent Nos. 1 and 2 Bank with the deadline having fixed by letter dt. 9.8.2007 that, if the remaining amount is not paid, the amount already paid would be forfeited. The petitioner questions the action in the teeth of the fact that, property in question is not free from encumbrances, as, after purchasing the property, the petitioner was made to understand of the existing charge on the said property, Commercial Tax Department, Government of Madhya Pradesh to the tune of Rs. 1,43,15,655/-towards outstanding Commercial Tax. The undisputed facts carved out from pleadings and relevant for the present are that, the property in question belonged to Bhopal Transmission Control, a private limited company. The said Company availed credit/loan facilities from the respondent Nos. 1 and 2 Bank against the property in question mortgaged as security.
2. In due course of time since Bhopal Transmission Control Company having defaulted to repay the outstanding to the tune of Rs. 11,72,67,00/- (Rupees Eleven Crores Seventy Two Lacs Sixty Seven Thousands only), led the Bank to declare the account as N.P.A and took recourse to Section 13 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter referred to as Act of 2002).
3. That, in exercise of powers conferred u/s 13 (4) of Act, 2002 read with Rule 8 of the Security Interest (Enforcement) Rules 2002 (hereafter referred as Rules 2002) the respondent Bank took possession of said property vide Possession Notice dated 8.2.2006.
4. Pertinent it is to note at this stage that prior to taking of possession of said property by the Bank, on an application by M/s. Bhopal Transmission Controls Pvt. Ltd. on 27.9.2004 for payment of Rs. 49,29,136/- in instalment, the Commissioner, Commercial Tax, Madhya Pradesh by his order dated 4.3.2005, accorded the facility to repay the commercial tax in the following terms:
5. With the passing of above order, the property in question which was mortgaged with the respondent Nos. 1 and 2 Bank got charged to the outstanding commercial tax dues, which as apparent from record that the dues towards commercial tax having not being cleared swelled to Rs. 1,43,15,655/- i.e., the principal sum towards tax plus the interest thereon.
6. As apparent from clause (1) of the order dated 4.3.2005, by the Commissioner, Commercial Tax, Madhya Pradesh, that the entire tax dues with interest was to be cleared within 24 months as per the installment.
7. That, before the expiry of said period, the Bank in pursuance to the possession of the property in question and in exercise of powers conferred vide Section 13 (4) of 2002 Act read with Rule 8 (5) of the Rules, 2002, put the said property on auction vide auction notice dated 23.4.2006, fixing the date of auction as 23.5.2006. The auction of the property in question, as apparent from auction notice, was on "as is where is basis".
8. The petitioner in pursuance to said auction notice offered the price of Rupees One Crore One Lakh as final bid price. The respondent Bank, however, did not accept the bid price as it was too low. This non�acceptance led to negotiation. On 26.6.2006 the petitioner submitted a fresh offer of Rs. 1.25 crores with an intention to take over the asset and liabilities to run the unit. The letter dated 26.6.2006 categorically stated:
We have mentioned earlier that we want to take over the assets and liabilities both with the intention to run the Unit. Further the liability of the Company is visibly more than what has been presented on the Balance Sheet
9. Furthermore, by letter dated 24 2.2007, the petitioner communicated with the Bank in following terms:
To,
The Senior Manager, UCO Bank
Piplani Branch,
Bhopal
Sub: Regarding Extension of the date for purchase of immovable property of M/s. Bhopal Transmission and Controls Pvt. Ltd. (BTCL) Private Treatise.
Dear Sir,
We had already deposited Rs. 25 lacs in the same account as per our commitment. We have also remitted another Rs. 5 lacs on 14th February for depositing the same in the account. We were making all arrangements to arrange rest amount of Rs. 1 crore to deposit in the account by 28th February as per our offer letter. However, in the meantime, we came to know that Commercial Tax Authorities have fixed a notice for auctioning the asset for non-payment of their dues and the amount claimed by them is Rs. 143 lacs which is very huge amount and unreasonably inflated. When we were intending to take this asset and at the same time to take the Company and also intend to clear these statutory taxes, negotiations with the Authorities, the sudden action initiated by the Commercial Tax Authorities have upset our original plant and programming.
Under the mentioned circumstances we would request you the following:
1) To give us some more breathing time i.e. upto 31st March, 2007 for finding out a course of action to deal with the salex tax problem.
2) We would also request you to kindly apprise the Commercial Tax Authorities, if possible, about the action initiated by your Bank in depositing off the immovable property of M/s. BTCL to us and we intend to take over the Company and start the activities as early as possible after settling all statutory dues of the Company. We only request the Tax Authorities to extend us some reasonable time for the same.
We thank you very much for the extension of time till the end of February 2007 and would also request you that on the basis of above mentioned facts which is beyond our control, to sympathetically consider our request and permit us to make the balance payment of Rs. 1 Crore by 31st March 2007.
10. The facts establishes two things, firstly that the property in question though put to auction by the Bank in exercise of the power conferred u/s 13 (4) of Act, 2002 read with Rule 8 of the Rules 2002 and the petitioner had bid for Rs. One crore one lakh the same was not accepted and the property was not auctioned. And, Secondly, instead of auction, private negotiation was entered into between the petitioner and bank, whereron, the petitioner had agreed to purchase the property in question with entire assets and liabilities, as during course of negotiation the petitioner had come across the liabilities over the property in question which included the Commercial Tax liability also.
11. These facts subdue the vociferous claim by the petitioner that the property in question was purchased in auction. In fact the auction having not culminated into the acceptance of final bid, but the transaction was through private negotiation, the benefit or the protection which the petitioner intends to reap from Section 100 of the Transfer of Property Act, 1882, that, the petitioner had on notice about the charge of the Commercial Tax Department over the property in question and therefore not binding on the petitioner is of no avail.
12. Section 100 of Transfer of Property Act provides for that:
100. Charges.- 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 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.
13. In the case at hand though auction notice dated 23.4.06 except making a mention that the property in question is being auctioned an "as is where is" basis, did not specifically mentioned that the Commercial Tax Department, Government of M. P. has a fist charge over the property, the petitioner is still not benefited because the transaction of property is not in pursuant to the said auction notice, but was purchased subsequently by the private negotiation which was only after the petitioner had satisfied himself regarding assets and liabilities incurred on the property in question. It cannot therefore, be assumed that, the petitioner had no knowledge of the property being encumbered by Commercial Tax Liability.
14. An ''encumbrance'' as held in
15. Section 530 of Vanijyik Kar Adhiniyam 1994, stipulates that "53. Tax to be first charge:- Notwithstanding anything to the contrary, contained in any law for the time, being in force and subject to the provisions of Section 53 of the Companies Act 1956 ( No. 1 of 1956), any amount of tax and/or penalty or interest, if any, payable by a dealer or other person under this Act shall be first charge on the property of the dealer or such person."
16. In the given facts of present case, the petitioner therefore, cannot be benefited by Section 100 T. P. Act or the decision in
17. That Section 49 of Adhiniyam 1994 stipulates:
49- Tax payable by transferee of business:- (1) When the ownership of the business of a dealer liable to pay the tax is entirely transferred the transferor and the transferee shall jointly and severally be liable to pay the tax together with penalty, if any or interest or penalty in respect of such business for any year or relatable to a part of any year and remaining unpaid at the time of the transfer and the transferee shall also be liable to pay the tax on the sales or purchases of goods effected by him with effect from the date of such transfer and shall within thirty days of the transfer apply for registration unless he already holds a registration certificate.
(2) `When a dealer liable to pay tax transfers the ownership of a part of the business the transferee shall be liable to pay tax in respect of the stock of goods transferred alongwith the part of his business, which is not so transferred, as if the goods have been sold by him, unless the tax on such goods is leviable on the last sale.
(3) Where any goods have already been subjected to tax under this Act nothing contained in sub-section (1) or sub�section (2) shall render such goods liable to tax for the second time.
(4) When a dealer is a firm or association of persons or a joint Hindu Family and such firm, association or family has discontinued business
(a) the tax payable under this Act by such firm, association or family for the period upto the date of such discontinuance may be assessed and determined as if no such discontinuance had taken place; and
(b) every person who was at the time of such discontinuance a partner of such firm or a member of such association or family shall not withstanding such discontinuance, be liable severally and jointly for the payment of the tax payable by such firm, association or family. Whether such assessment is made prior to or after such discontinuance and, subject as aforesaid the provisions of this Act shall apply as if every such person or partner were himself a dealer:
Provided that when it is found that a change has occurred in the constitution of the firm or association or that such firm or association has transferred its business and the tax payable by a partner or member as aforesaid can not be recovered from him, it may be recovered from the or association as reconstituted or from the transferee.
Provided further that where a tax is recovered from the firm or association or transferee as aforesaid such firm or association or transferee shall be entitled to recover the same from the partner or member who was originally liable to pay tax.
Explanation-The dissolution or reconstitution of a firm or association of persons or partition of Joint Hindu family shall be deemed to be discontinuance of business within the meaning of this sub-section.
(5) The provisions of this section shall apply mutatis mutandis to any arrears of tax payable under the Act repealed by Section 52 of Act No. 2 of 1959 of the Act repealed by this Act and due for any year of relatable to a part of any year period to such transfer of business, discontinuance or dissolution of the partnership or the partition of undivided Hindu Family, as the case may be.
18. In the instant case the material on record reveals that the petitioner since very inception had been interested in taking over the Bhopal Transmission Controls (P) Ltd. Company along with its assets and liabilities to own the same kind of business and produce related goods and tax to establish the manufacturing activity. This fact would be established from documents Annexures R/1, R/2, R/4 and R/8. Vide Annexure R/8 which is a communication dated 29.5.07 addressed to the Senior Manager of respondent Bank it is categorically stated by the petitioner that :"we are not only taking assets from you, we are trying to take the Company as well. The Statutory Taxes of all the departments are so high which was not known to us before. Only the Sales Tax Component is Rs. 143.00 lakhs. All the four departments- Sales Tax, Central Excise, Corporation, Provident Fund, ESI have advertisements for auction of the same.
Some Statutory Taxes are not avoidable even if we do not take the company besides Banks money we are paying a lot of money outside to make some balance for all this.
Under the circumstances we have already requested vide out letter dated 23.5.07 to Mr. Mohanty for giving us some more time.
At this point of time we cannot pay any interest for the remaining amount.
Please consider the extension of time as requested by us.
19. After the aforementioned correspondence there remains no iota of doubt that, the petitioner besides the ownership of business in M/s Bhopal Transmission and Controls (P) Ltd. had purchased its assets and owed the liability to clear the tax components. The petitioner now cannot wriggle himself out of the liability expressly owned by him when called to deposit the remainder amount by impugned letters dated 9.8.07 and 3.8.07, Annexure P/1 and P/2 respectively, nor can he turn away from such liability.
20. That during course of hearing it was observed that the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994 has been repealed by virtue of Section 72 of The Madhya Pradesh VAT Act, 2002, which received the Presidential Assent on 12th November, 2002, first published in the "Madhya Pradesh Gazette (Extra-Ordinary)" dated 28th November, 2002. The repeal is however subject to the Saving Clause as provided u/s 72.
21. Section 33 of the VAT Act 2002 stipulates:
33- : Tax to be first charge
(1) Notwithstanding anything to the contrary, contained in any law for the time being in force and subject to the provisions of section 530 of the Companies Act, 1956 ( No. 1 of 1956), any amount of tax and/ or penalty or interest, if any, payable by a dealer or other person under this Act shall be first charge on the property of the dealer or such person.
(2) Notwithstanding anything contained in this Act, where a dealer or person is in default or is deemed to be in default under clause (a) of sub-section (11) of section 24 and whose property is being sold by a bank or financial institution for recovery of its loan, the Commissioner may forgo the right of first charge as mentioned in sub-section (1) against the property sold on the following conditions:-
(a) if the arrears of tax, penalty, interest or part thereof or any other amounts is up to 25 percent of the total auction value, the arrears shall be paid in full by the bank or financial institution;
(b) if the arrears of tax, penalty, interest or part thereof or any other amount is more than 25 percent of the total auction value, the 25 percent of the total auction value and the amount in the same proportion of the remaining auction value as the remaining arrears bear to the total dues of the bank or financial institution, shall be paid by the bank or financial institution.
22. The petitioner as also the respondents No. 1 and 2 who have entered into Sale transaction of the property in question which is subject to the charge in lieu of Commercial Tax dues, would therefore, be at liberty to avail the remedy u/s 33 (2) of VAT Act, 2002.
23. Except the above liberty no further relief can be granted to the petitioner nor the Commercial Tax Department can be prevented from proceeding with the auction of the property in question to realize their Commercial Tax dues. In view whereof, petition fails and is hereby dismissed. The parties to bear their respective costs.
