C.W.P No. 1385 of 2008

::1::

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

C.W.P No. 1385 of 2008

Date of decision : September 11, 2008

M/S T.C.Spinners Pvt Limited

...... Petitioner

through Mr.Jagmohan Bansal, Advocate

v.

The Union of India & others,

...... Respondents

through Ms.Anjali Kakkar, Advocate

CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL

HON'BLE MR.JUSTICE AJAY TEWARI

***

1. Whether Reporters of Local Newspapers may be allowed to see the

judgment ?

2. To be referred to the Reporters or not ?

3. Whether the judgment should be reported in the Digest ?

***

AJAY TEWARI, J

The writ petition has been filed challenging the letters dated

31.10.2007 and 4.1.2008 whereby respondent No.3 asked the petitioner to

pay the outstanding excise duty of Rs.990.36 lacs of M/S Euro Cotspin Ltd

(for short “ECL”), in terms of the provisions of Section 11 of the Central

Excise Act, 1944 (for short “the Act”) read with Section 142 of the Customs

Act.

E.C.L was a defaulter of various financial institutions which

ultimately authorized one of them i.e Punjab National Bank to sell the

secured assets of ECL under the Securitization and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 ( for short

“SARFAESI Act”) to realize total duties running into approximately Rs.165

C.W.P No. 1385 of 2008

::2::

crores. In response to advertisements, one M/S A.V Cotex Ltd ( for short

“AVC”) agreed to buy the said assets for a total sale consideration of Rs.29

crores. However, on the default of the said AVC, an agreement was entered

into between it and the petitioner, as per which the petitioner made the

required payment to make up 25% of the total purchase price. On the basis

of this agreement, the petitioner further entered into an agreement with the

Punjab National Bank which also handed over custody of the secured assets

of the ECL.

Thereafter, by the impugned letters, respondent No.3 directed

the petitioner to clear the outstanding dues as aforesaid and it is this action

which is impugned by way of the present writ petition.

The matter is not res integra. More than a decade ago, the

Hon'ble Supreme Court in M/S Isha Marbles vs Bihar State Electricity

Board & another, reported as JT 1995(2) SC 626, held that a bona fide

auction-purchaser under a statutory sale was not liable to clear electricity

dues of the previous owner by holding as follows :-

“What we have discussed above appears to be the law

gatherable from the various provisions which we have

detailed out above. It is impossible to impose on the

purchasers a liability which was not incurred by them.”

Thereafter, in State of Karnatka and another versus Shreyas

Papers Pvt.Ltd. & others reported as JT 2006(1) SC 180, the Hon’ble

Supreme Court stated the following questions:-

“1.1 Firsly, whether the purchaser of assets of a

concerns old by a State Financial Corporation, in

exercise of its powers under Section 29 of the State

C.W.P No. 1385 of 2008

::3::

Financial Corporations Act, 1951 (hereinafter “the SFC

Act) would be liable under the karnatka Sales Tax, 1957

(hereinafter “the KST Act”), for the arrears of sales tax

of the concern whose assets have been transferred?

1.2

Secondly, under what circumstances does a

charge created on a property become unenforceable

against a transfree of such a property?”

The Hon’ble Court held as follows:-

“In these circumstances, we are of the view that the first

respondent was a purchaser for value without notice of

the sales tax arrears of the defaulting company or the

consequent charge on the property. This would,

therefore, attract the principle laid down by this Court

in Ahmedabad Municipal Corporation, which is also

embodied in the proviso to Section 100 of the TP Act.

Thus, the property in the hands of the first respondent

was free of the charge and it is not open to the

appellants to enf