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2009 Supreme(P&H) 1143
PUNJAB & HARYANA HIGH COURT
Permod Kohli, J.
M/s Excel Buildcon Private Limited
Versus
Municipal Corporation, Faridabad
CWP No. 17472 of 2006,
Decided On : JULY 14, 2009
An auction purchaser is not liable for the tax dues of the previous owner if the property was sold without encumbrance or charge, as per the provisions of the Companies Act, 1956.
Headnote:
Municipal Corporation - Tax Liability - Companies Act, 1956, Sick Industrial Companies (Special Provision) Act, 1985 - Section 457, 456, 528, 529, 530 - The court discussed the liability of an auction purchaser for the previous owner's tax dues and emphasized that the purchaser is not liable for such dues if the property was sold without encumbrance or charge. The court referred to key provisions of the Companies Act, 1956 and their application in determining the tax liability of the purchaser.
Fact of the Case:
The petitioner, an auction purchaser, sought quashment of a demand letter from the Municipal Corporation for tax dues of the previous owner and refund of the amount paid. The court found that the petitioner was not liable for the taxes and ordered the Corporation to adjust the amount against future taxes.
Finding of the Court:
The court found that the petitioner was not liable to pay the tax dues of the previous owner and quashed the demand letter. It ordered the Corporation to adjust the amount already paid by the petitioner against future taxes.
Issues: The main issue was the liability of the auction purchaser for the tax dues of the previous owner.
Ratio Decidendi: The court held that the auction purchaser is not liable for the tax dues of the previous owner if the property was sold without encumbrance or charge. It emphasized the application of key provisions of the Companies Act, 1956 in determining the tax liability.
Final Decision: The petition was allowed, and the demand letter from the Municipal Corporation was quashed. The court declared that the petitioner was not liable for the taxes and ordered the Corporation to adjust the amount already paid by the petitioner against future taxes.
Permod Kohli, J.
1. Respondent No. 3- a Limited Company incorporated under Companies Act, 1956 was the owner and possessor of Plot No. 136, Sector 24, Faridabad (Haryana) being industrial plot where steel plant was established. The registered office of the said Company was also on the same plot. The said Company closed its factory on 27.4.1985. Due to financial crunch, the said Company approached the BIFR for rehabilitation under the provisions of the Sick Industrial Companies (Special Provision) Act, 1985 as the Company had become economically and commercially unviable on long term basis. The recommendations of the BIFR were forwarded to the High Court of Punjab and Haryana for formal winding up as the Company was having its registered office at Faridabad (Haryana) within the territorial jurisdiction of the Court. Even though, respondent No. 3-company made various efforts by filing appeals/writ petitions to avoid the winding up, but having failed in its attempt, the Punjab and Haryana High Court finally passed the winding up order on. 24.2.1995 in CP No. 31 of 1995 and the Official Liquidator attached to the Court was appointed as the liquidator for the respondent No. 3-Company. While the liquidation proceedings was pending, Haryana Financial Corporation, one of the secured creditors, filed CP No.72/1995 for permission to sell the land., building, fixtures, plant and machinery and other misc. items of respondent No. 1-Company. The High Court vide its order dated 21.7.1995 granted permission to the Haryana Financial Corporation to sell the assets of the Company in liquidation. The assets of respondent No. 3-Company were sold to the petitioner for a sale consideration of Rs. 4.10 crores which includes all the movable, immovable assets lying at Plot No. 136, Sector 24, Faridabad. Sale in favour of the petitioner was confirmed by the Company Court vide order dated 1 7.9.2004 and consequently, the Official Liquidator on receipt of the entire sale consideration handed over possession to the petitioner on 23.9.2004 as is evident from the Certificate issued by the Official Liquidator dated 11.10.2004 (Annexure P-2). Consequently, the Official liquidator vide its letter dated 11.10.2004 informed the Deputy Commissioner, Municipal Corporation, Faridabad to enter the name of the petitioner-Company in its record for taxing purposes. Similar letter (Annexure P-4) was sent to the Administrator HUDA, Faridabad (Haryana). It was specifically mentioned in the sale Certificate (Annexure P-2) that the sale in favour of the petitioner is free of any charges or lien. Municipal Corporation, Faridabad and the HUDA was also informed that the petitioner-Company be treated as a new entity for future without demanding previous dues upto 23.9.2004. HUDA issued No Due Certificate to the petitioner. However, respondent No. 1-Municipal Corporation, Faridabad did not issue any certificate. The petitioner made a representation dated 30.1.2006 requesting them to issue No Due Certificate with regard to House Tax, Fire Tax, Profession Tax and Water Tax etc. upto 23.9.2004. However, the petitioner was informed vide letter dated 18.4.2006 addressed in the name of respondent No. 3 through the petitioner-Company to deposit the Municipal dues upto 31.3.2006. It is alleged that the petitioner being in need of water supply for its business activity was constrained to deposit the demand vide demand draft dated 19.4.2006 under duress. After depositing the aforesaid amount, the petitioner has filed this petition seeking quashment of letter dated 18.4.2006 (Annexure P-7) and refund of Rs. 8,37,727/- paid by it on behalf of respondent No. 3 on account of house tax etc, upto 23.9.2004. The petitioner has placed on record copy of the receipt of payment of the aforesaid amount.
2. I have heard learned counsel for the parties.
3. It is contended on behalf of the petitioner that the issue involved in the present petition is no more res integra. Honble Apex Court in the
