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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
MOHAMMAD RAFIQ, GOVERDHAN BARDHAR, JJ.
M/s Universal Polysack India Pvt. Ltd. – Appellant
Versus
Union of India – Respondent
D.B. Civil Writ Petition No. 2306 of 2017
Decided on : 14-02-2019
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13, 13A, 11, 11E, 13(2) and 13(4)., 13(12), 11A - Customs Act, 1962 - Section 142 - Central Excise Act - Section 11, 11AA - Karnataka Sales Tax Act, 1957 - Section 15(1) , 29(1) - Transfer of Property Act - Section 100 - Constitution of India - Article 372 (1) – Recovery and auction letter - Seek a declaration - Assessee -Ppurchased the property - Mortgaged land - Assets, possession and control. –whether the priority should be given to the dues of the Central Excise Department over the secured creditors, but they do not directly deal with the question whether despite stipulation to the contrary, the buyer of the land and building and plant and machinery of the defaulting unit from the bank with whom all such properties were mortgaged, can be required to pay the dues of the central excise even when he has not purchased the said unit as an ongoing business and the stipulations in the agreement to sale and the deed of conveyance clearly provided that all liabilities or duties statutory or otherwise till the date of the sale including the sale tax dues, customs and central excise dues, labour dues, local bodies dues or any other dues, shall be to the count of and be borne by, the borrower/mortgager and neither the subsequent purchaser, nor the bank, would be liable to pay the sam.
Facts of the case:
Facts of the case are that the respondent no.5-M/s. Oosyine Mar Pack Ltd. took a loan facility against the mortgaged land, plant and machinery in the year 2001 from respondent no.7- Oriental Bank of Commerce on the personal guarantee of respondent no.6-M/s. Keymer Bagshawe Marketing Co. Pvt. Ltd. The loan account of the respondent no.5 as per the guidelines of the RBI was declared as Non Profitable Asset (NPA) on 30.11.2009. The respondent-bank thereafter on 29.3.2011 in terms of Section 13 of the SARFAESI Act and the SARFAESI Rules, 2002 took over the mortgaged property i.e. factory with all its assets, possession and control. The respondent no.7 vide its notice dated 18.6.2011 and 7.8.2011 wanted to sell the mortgaged property for the reserve price, which was later revised under Section 13A of the Act read with Rule 9 of the SARFAESI Rules.
Finding of the court:
Most of the judgments cited by the respondents are on the question whether the priority should be given to the dues of the Central Excise Department over the secured creditors, but they do not directly deal with the question whether despite stipulation to the contrary, the buyer of the land and building and plant and machinery of the defaulting unit from the bank with whom all such properties were mortgaged, can be required to pay the dues of the central excise even when he has not purchased the said unit as an ongoing business and the stipulations in the agreement to sale and the deed of conveyance clearly provided that all liabilities or duties statutory or otherwise till the date of the sale including the sale tax dues, customs and central excise dues, labour dues, local bodies dues or any other dues, shall be to the count of and be borne by, the borrower/mortgager and neither the subsequent purchaser, nor the bank, would be liable to pay the same.
Result: Petition allowed.
JUDGMENT :
MOHAMMAD RAFIQ, J.
1. This writ petition has been filed by M/s. Universal Polysack India Pvt. Ltd., Beawar challenging the recovery and auction letter dated 8.2.2017 issued by the respondent-Central Excise Department and their communication dated 15.3.2016 and 29.9.2015 and also to seek a declaration to the effect that petitioner is not the defaulter and cannot be made responsible for the dues of the defaulting borrower/erstwhile assessee as he has purchased the property under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short-`the SARFAESI Act’) with zero duty liability.
2. Facts of the case are that the respondent no.5-M/s. Oosyine Mar Pack Ltd. took a loan facility against the mortgaged land, plant and machinery in the year 2001 from respondent no.7- Oriental Bank of Commerce on the personal guarantee of respondent no.6-M/s. Keymer Bagshawe Marketing Co. Pvt. Ltd. The loan account of the respondent no.5 as per the guidelines of the RBI was declared as Non Profitable Asset (NPA) on 30.11.2009. The respondent-bank thereafter on 29.3.2011 in terms of Section 13 of the SARFAESI Act and the SARFAESI Rules, 2002 took over the mortgaged property i.e. factory with all its assets, possession and control. The respondent no.7 vide its notice dated 18.6.2011 and 7.8.2011 wanted to sell the mortgaged property for the reserve price, which was later revised under Section 13A of the Act read with Rule 9 of the SARFAESI Rules.
3. Shri Sameer Jain, learned counsel for the petitioner has submitted that the factory premises was situated in backward area and therefore nobody turned up to purchase the said factory under the SARFAESI Act. Petitioner however purchased the aforesaid factory premises with land, plant and machinery as one time settlement in terms of agreement to sale dated 19.10.2012 for a sale consideration of Rs.5.48 crores. Necessary changes were also included in the revenue records of the jamabandi. Petitioner as well as respondent nos.5 and 6 and also respondent no.7-Bank were parties to the aforesaid agreement to sale. Clause 13 thereof categorically stated that petitioner will not be responsible for statutory dues like Sales Tax, VAT, Customs, Central Excise, labour dues, Electricity dues, etc. In other words, petitioner-company purchased the land, building, scrap plant and machinery under the SARFAESI Act from the respondent-bank which had the first charge thereon. Consequential sale deed (Annexure-4) was executed on 20.3.2013 to which all the above referred to four parties were signatories, for a sum of Rs.5,47,77,000. As per the terms and conditions of the contract, payment in terms of SARFAESI Act was paid by the petitioner to the Bank. There was a specific clause pertaining to the fact that none of the statutory dues on account of any taxes or of any other kind prior to execution of agreement will be on the part of the petitioner, rather the same would be borne by respondent nos.5 and 6. Petitioner thus purchased the land, building, the junk plant and machinery, etc. with zero liability.
4. It is argued that petitioner soon after taking possession of the disputed articles, removed the junk plant and machinery and after a long time was able to find out buyer at throw away prizes amounting to Rs.63,000, Rs.29,826, Rs.4,76,595 and Rs.2,04,025 respectively, thus a total of Rs.7.75 lakhs was received as sale consideration. Petitioner has not carried out manufacturing activity, but merely purchased entire plant and machinery from M/s.Lohiya Corp. Ltd. Petitioner then sought registration with the Central Excise Department, which was granted on 9.4.2013 by the learned Assistant Commissioner, Ajmer Division. The value of the plant and machinery was approximately 6-7 crores. Petitioner by dint of hard work was able to achieve the turnover of approximately Rs.30 crores in the respective financial years on which Central Excise Duty at the applicable rate of duty w
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