CEMENTS INDUSTRIES PVT. LTD. , LUCKNOW vs COLLECTOR/D. M. , LUCKNOW

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2010 Supreme(All) 928

[2010(3) ADJ 263 (DB)(LB)]
ALLAHABAD HIGH COURT
(Lucknow Bench)
BEFORE : DEVI PRASAD SINGH AND DR. SATISH CHANDRA, JJ.
M/s R.D. CEMENTS INDUSTRIES PVT. LTD., LUCKNOW ....Petitioner
Versus
COLLECTOR/D.M., LUCKNOW AND OTHERS ....Respondents
(Misc. Writ Petition No. 9080 of 2007 and 6345 of 2002, decided on 17th March, 2010)

Advocates:
Counsel :
F.A. Khan, Sri Prashant Chandra Sr. Adv., Dhruv Mathur, Sandeep Dixit, Alok Mathur, G.P.Mathur, Pradeep Agarwal, Ram Raj, Smt. B. Godiyal and Vivek Srivastava for the Petitioner; H.P. Srivastava Addl. C.S.C., Gaurav Mehrotra, I.B. Singh Sr. Adv., Alok Mathur, Vivek Raj Singh, H.P. Srivatava Adl. C.S.C., P. Chandra, Ram Karan Agarwal,Vivek Raj Singh for the Respondent.

Headnote:(A) U.P. Trade Tax Act, 1948—Section 8 (2-A)—Tax Deferment Liability thereunder—Responsibility of—Saddled on U.P. Asbestos Ltd. (UPAL), for taken by Pradeshiya Industrial and Investment Corporation, U.P. (PICKUP)—Subsequently, UPAL sold its unit to U.P. Cement Limited (UPCL) after obtaining permission from PICKUP—Vendee UPCL and Vendor UPCL entered into agreement and signed it, under which UPCL owned responsibility to pay deferred tax—In this view of the matter UPCL cannot be permitted to deny its liability—High Court in exercise of its writ jurisdiction will not examine validity of liability, when UPCL has not approached appropriate forum challenging its tax liability. [Constitution of India, 1950—Article 226]. [Paras 40 to 42, 97, 98, 101 and 102]
       (B) U.P. Zamindari Abolition and Land Reforms Act, 1950—Sections 3 (4), 284 and 285—U.P. Zamindari Abolition and Land Reforms Rules, 1951—Rules 281 to 285, 285-A to 285-J and 205-M—U.P. Land Revenue Rules, 1901—Sections 14, 14-A and 15 to 19—Attachment and sale of property for realisation of arrears—Powers of Collector, its exercise and procedure to be followed—Elaborated—Sale of property by auction, conducted by Naib Tahsildar, who was not authorised by Collector or Assistant Collector—Invalid—Apart from it neither proclamation of such sale was published in two widely circulated newspapers nor estimated cost of property was announced—These factors too, make auction sale against statutory rules and against law—Such sale can be cancelled by collector on ground of procedural irregularity and illegality—High Court too, is not precluded to consider and take into account material on record while adjudicating controversy particularly when there is jurisdictional error—Both notification dated 6.6.1953 issued by State Government were regarding exercise of powers under U.P. Land Revenue Act and had no concerned with powers regarding auction sale—Fact that auction purchaser has deposited entire dues—It of no help to auction purchaser, when entire auction sale is found to have been conducted in violation of statutory requirements, event if action of auction purchaser was found to be bona fide in participation of auction sale proceedings—Several other legal aspects—Focussed. [Constitution of India, 1950—Article 226]
        [Paras 43 to 54, 59 to 64, 66, 67, 77, 78, 80 to 82 and 102]
       (C) Transfer of Property Act, 1882—Section 52—Contempt of Courts Act, 1971—Section 2 (b)—Property transferred in spite of order prohibiting transfer—Passed by High Court in writ petition pending before High Court—Hit by doctrine of 'lis-pendens', contained in Section 52—Transferee, in such situation stands on his own risk, based on outcome of decision of pending writ petition—Apart from it such transaction in violation of High Court's restraining order—Amounts to contempt of Court too—It become duty of High Court to maintain supremacy and majesty of law and to pass appropriate order—In the instant case, High Court declared such sale as void-ab-initio. [Paras 103, 104 and 106 to 108]
       (D) Constitution of India, 1950—Article 226—Petitioner challenging auction notice and recovery proceeding—By successive writ petitions—Conceling facts of case that there exists interim order of High Court—Such conduct amounts to abuse of process of law—High Court dismissing all writ petitions, taking such conduct to fraud also directed for appropriate proceeding for such fraud, concealment of fact and abuse of process of law. [Paras 109 to 118 and 124]

JUDGMENT

Hon’ble Devi Prasad Singh, J.—The brief facts giving rise to the present writ petitions filed under Article 226 of the Constitution of India, relate to repayment of loan by the borrower to the Pradeshiya Industrial and Investment Corporation, Uttar Pradesh (in short the PICUP), as well as auction and sale of the industry on account of default of payment of loan.

2. Originally, M/s. U.P. Asbestos Limited (in short the UPAL) was engaged in manufacture and sale of asbestos sheets and cement from its industry situate at Mohanlalganj, Lucknow. It was enjoying the benefit of trade tax exemption under Section 4-A of Trade Tax Act, 1948 for a period of 8 years, vide letter dated 23.10.2000. Against the said exemption, under Section 8 (2-A) Tax Deferment Liability was granted and against that, the PICUP granted “interest free trade tax deferment loan” to UPAL for the period 1996-97 to 1999-2000. The properties were mortgaged and the second charge was created by the UPAL on all their movable and immovable assets, like assets of asbestos and cement unit.

3. UPAL sold its cement unit situate at Mohanlalganj, Luckow to M/s. U.P. Cement Limited (in short UPCL) after obtaining due permission from PICUP with the rider that second charge on the property of UPAL shall continue with PICUP and the UPCL shall not claim benefit of the deferment loan for the period subsequent to the sale of cement unit to UPCL in terms of original agreement between the UPAL and the PICUP.

4. Subject to the above condition, a Memorandum of Understanding (in short MOU) was executed between the UPAL and UPCL. The cement unit of UPAL was sold to UPCL for Rs. 400 lakhs. Out of the sale consideration, Rs. 275 lakhs of balance amount of the term loan along with interest from the date of transfer of loan, was agreed to be paid by the UPCL to Industrial Development Bank of India (in short IDBI). The balance of amount of Rs. 125 lakhs was agreed to be paid to UPAL in instalments by 26.11.1999. Under the MOU dated 27.7.1999, the UPCL was to get possession of the cement unit after payment of sale consideration including expenses regarding compliance of formalities.

5. However, UPCL applied to PICUP, vide letter dated 23.8.2000 and then to the Principal Secretary, Tax and Registration, Government of U.P., vide another letter dated 3.10.2000 for transfer of interest free trade tax deferment loan which was already availed by UPAL. The request was rejected by PICUP, vide letter dated 9.10.2000. The PICUP sent another letter dated 12.10.2000 to the Principal Secretary, Tax and Registration (in short PST & R) against transfer of loan already availed by UPAL. The PST & R, vide letter dated 18.10.2000 advised the PICUP that there is no difficulty in transferring the loan already availed by UPAL in favour of UPCL subject to rider that UPCL should provide necessary security.

6. Keeping in view the advice of the State Government (letter dated 18.10.2000), the PICUP by means of the letter dated 23.10.2000, agreed for transfer of interest free trade tax deferment loan which was already availed by UPAL before transferring the unit to UPCL with certain riders mentioned in the letter but the UPCL failed to fulfil the condition imposed by the Government in its letter dated 23.10.2000.

7. Instead of fulfilling the condition as per letter dated 23.10.2000, the UPCL inter alia requested the Principal Secretary, Trade Tax and Registration (hereinafter known as PST & R), vide its letter dated 8.1.2001, to grant relief of adjusting the loan availed by the UPAL towards balance amount paid to UPCL by UPAL and to execute the sale-deed in favour of the UPCL. The PST & R, vide its letter dated 11.1.2001 informed that UPAL has been granted loan by PICUP on its cement unit and since the cement unit has been sold to UPCL, the benefit and liability of cement unit should also be transferred to UPCL. The PST & R also issued certain directions through the said letter.

8. Keeping in view the directions of

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2010 Supreme(All) 928

Cases Referred (36)