The main legal point established in the judgment is that the bank's sale of repossessed cars constitutes a sale and qualifies the bank as a dealer under the Delhi Sales Tax Act, 1975.

S. Muralidhar, J.

1. This is a reference made to this Court by the Appellate Tribunal Sales Tax, Delhi (‘Tribunal’) under Section 49 of the Delhi Sales Tax Act, 1975 (‘DST Act’) requiring it to answer the following questions of law:

(i) Whether in the facts and under the circumstances of the case, the findings of the Tribunal that the ex parte order dated 21st July 1998 passed by the Commissioner of Sales Tax was passed after reasonable and adequate opportunity is perverse?

(ii) Whether the Tribunal was correct in holding that the period of six months required by Section 49 of the Delhi Sales Tax Act read with Rule 42 is directory and therefore, the order of the Commissioner dated 21st July 1998 on the application dated 15th October 1995 was valid in law?

(iii) Whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the disposal of repossessed cars by the Appellant Bank constitutes a sale by the Bank?

(iv) Whether in the facts and under the circumstances of the case the Appellate Tribunal was correct in holding that the Appellant Bank which has disposed of cars repossessed from defaulting borrowers is a dealer within the meaning of Section 2 (e) read with Section 2 (c) of the Delhi Sales Tax Act?

(v) Whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the activity of the banking carried on by the Appellant Bank amounts to business under Clause (i) of Section 2 (c) of the Delhi Sales Tax Act, 1975?

(vi) If the answer to Question No. 5 is yes, whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the sale of the repossessed cars by the Appellant is incidental or ancillary or in connection with the Appellant’s business.?

2. The background to the reference is set out in the statement of case drawn up by the Tribunal. The Appellant, M/s. Citi Bank (‘Bank’), is a foreign company carrying on banking business in India by virtue of license granted under Section 22 of the Banking Regulation Act, 1949 (‘BR Act’). It also makes advances for purchase of cars repayable in monthly instalments. The cars which are financed are hypothecated to the Bank as security. The possession of the cars continues with the borrowers. Upon default in repaying the loan instalments, the Bank has the right to repossess the car and bring it to sale in order to recover the outstanding amount.

3. A copy of the standard loan agreement entered into by the Bank with the borrower has been placed on record. It is described as an ‘unattested loan-cum-hypothecation-cum-guarantee agreement’. Inter alia Clause 2 (1) states that “borrower(s) by way of providing security to the Bank against the loan amount/overdraft facility undertake to hypothecate the vehicle for which/or against which loan amount/overdraft facility is being taken.” Clause 2 (4) sets out the undertaking of the borrower(s) “to get the endorsement of hypothecation done in the registration certificate book from the concerned Road Transport Office.” Clause 2 (5) states that “the hypothecation of the vehicle shall be first and exclusive charge against the bank dues.” Clause 4 sets out 8 instances of ‘event of default’ and states that on the occurrence of the events, the Bank shall be entitled to demand immediate repayment of the loan, together with extra 2% or any other rate applicable at that time in terms of the bank policy on the principal amount outstanding. Clause 4 (9) states “the bank is entitled to take the repossession of the hypothecated vehicle whether the entire loan amount has been recalled or not, whenever in the absolute discretion of the Bank there is likelihood or due money not being paid and/or the vehicle is likely to be transferred to defeat the security and the due amounts of the Bank.” Clause 4 (10) inter alia states that the authorized representative of the Bank “would be entitled to sell the vehicle by public auction or private treaty, w