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2019 Supreme(Mad) 3015
IN THE HIGH COURT OF MADRAS
Anita Sumanth, J.
Foods, Fats and Fertilizers Limited and Ors. – Appellants
Versus
Deputy Commissioner, Commercial Taxes, Kancheepuram and Ors. – Respondents
W.P. No. 5010 of 2010 and M.P. No. 2 of 2010
Decided On : 25-09-2019
For the Appellant :D. Bharatha Chakravarthy for Sai Bahrath and Ilan, Advocates
For the Respondent:Haribabu, AGP and S.R. Raghunathan, Advocate
Headnote:
Tamil Nadu General Sales Tax Act, 1959 – Section 24 (2) – Petitioners are the purchasers of properties bearing Survey, situated at Pukkathurai Village, Maduranthakam Taluk, Chengalpattu District (property in question) – Property in question had been purchased by the petitioners under an auction sale conducted by the third respondent, Karnataka Bank Limited (Bank) – Pursuant to the purchase thereof, the Commercial Tax Officers/the first and second respondents, (R1 and R2), appear to have issued an order of attachment followed by a sale notice, impugned in this Writ Petition –Held, Learned counsel for the Revenue places reliance on a decision of the learned single Judge of this Court sitting in Madurai, in the case is distinguishable for the reason that the sale in question was a private sale and the only ground raised by the petitioner in that case was that he was a bona fide purchaser, who could not be held liable for default of sales tax by a third party assessee – Upon consideration of these facts and following the decision of the Division Bench of this Court in the case, the learned single Judge dismissed the Writ Petition stating that the mere fact that the purchaser was a bonafide purchaser would not come to his aid – No other argument, specifically on the legal provisions involved, appear to have been advanced for consideration – Writ Petition allowed.
ORDER :
Anita Sumanth, J.
The petitioners are the purchasers of properties bearing Survey Nos. 5/1D1, 5/1D3A, 6, 1/3A, 1/3B, 5/1D2, 1/3C, 5/1D3 and 6, situated at Pukkathurai Village, Maduranthakam Taluk, Chengalpattu District ('property in question'). The property in question had been purchased by the petitioners under an auction sale conducted by the third respondent, Karnataka Bank Limited ('Bank'). Pursuant to the purchase thereof, the Commercial Tax Officers/the first and second respondents, (R1 and R2), appear to have issued an order of attachment dated 19.01.2010 followed by a sale notice dated 15.04.2010, impugned in this Writ Petition.
2. The brief sequence of dates and events is that the fourth respondent, (R4), an assessee in terms of the provisions of the Tamil Nadu General Sales Tax Act, 1959 ("TNGST Act'), was admittedly in arrears of commercial tax as well as in default of repayments of financial accommodation received from the Bank. The property in question had been offered as security by R4 to the Bank that had registered a charge on 10.05.2006 before the appropriate Sub-Registrar. This is not disputed.
3. In respect of the commercial tax arrears, admittedly no charge was initially created and the stand of R1 and R2 is that an automatic charge was created by operation of Section 24 (2) of the Act that continued in force till such time the charge was actually created and registered on 23.07.2007. The charge created by the Commercial Taxes Department is subsequent to the registration of charge by the Bank. The petitioners, upon noting the auction sale notice participated in the sale, purchasing the property in question on 25.03.2008. A sale certificate has been issued by the Bank. The petitioners are two companies of the same group entitles. The terms of auction provided that the confirmation of auction could be either in favour of the purchaser or its nominee and upon nomination of the second petitioner by the first, the sale certificate was issued in the name of the former.
4. The case of the petitioners is that upon noting the notification of auction sale by the Bank, a verification was undertaken with the concerned Sub-Registrar when it was noted that a registered mortgage stood in favour of the Bank. Being satisfied of the title held by the bank, they had participated in the auction and had purchased the property on payment of sale consideration. The sale certificate has been issued on 22.10.2009. Thus, according to them, they are bonafide purchasers of the property in question and have received good and valid title in respect of the same from the Bank.
5. The petitioners rely on the decision of a Division Bench of this Court in the case of Gupta and Company v. Commercial Tax Officer and Others W.P. No. 6267 of 2006 dated 09.03.2018, as per which the priority of charge would have to be determined in the light of the provisions of Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short 'SARFAESI Act') and bearing in mind the dates on which the charge had been created by secured financial creditors.
6. The case of the Bank is that a term loan overdraft facility for a sum of Rs. 5,00,00,000/- had been disbursed in 2006 to R4, who had defaulted in repayments. Notice under Section 13(2) of the SARFAESI Act had been issued on 30.03.2007 and the property had been taken possession of in terms of Section 13 (4) of the SARFAESI, and brought to auction sale. The mortgage was created and registered on 10.05.2006, simultaneous with the disbursal of financial accommodation.
7. The Bank relies on the provisions of Section 26E of the SARFAESI Act, which according to it, accord it primary charge in respect of properties mortgaged to it for the satisfaction of debts created by the security interest.
Reliance is placed on the decisions of this Court in the cases of
(i) UTI Bank Ltd. v. Deputy Commissioner of Central Excise Chennai II Division (2007) 208 ELT 3 : A
