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of <h1>Purchaser not liable for loanee's customs dues in sale under State Financial Corps Act</h1> <h3>Vijayalakshmi Enterprises Versus Assistant General Manager, Andhra Pradesh State Financial Corpn.</h3> Vijayalakshmi Enterprises Versus Assistant General Manager, Andhra Pradesh State Financial Corpn. - [2004] 52 SCL 11 (AP) Issues:1. Liability of a purchaser in a sale under section 29 of the State Financial Corporations Act, 1951 for dues of the loanee payable to customs and excise authorities.2. Interference by respondent authorities with the removal of machinery from the premises of the loanee.Analysis:Issue 1:The petitioner, a highest bidder in an auction under section 29 of the Act, sought a declaration that a purchaser is not liable for the loanee's dues to customs authorities. The loanee, an export-oriented unit, failed to pay customs duty amounting to Rs. 52.34 lakhs. The petitioner argued that no charge is created on the machinery under the Customs Act, relying on a court decision. The State Financial Corporation supported this stance, stating no liability exists post bond expiration. However, respondent authorities claimed the petitioner is liable due to the loanee's EOU status and bond for duty exemption. The judgment cited relevant provisions of the Customs Act and the State Financial Corporations Act, emphasizing the absence of a charge on exported machinery for duty payment.Issue 2:The judgment clarified that under section 29 of the Act, the financial corporation's ownership upon default by the loanee extends only to securing and realizing the loan. The ownership transfer post-action is free from encumbrances, allowing the corporation to sell the property. Conditions in the sale confirmation letter exempted the purchaser from settling dues with the Customs Department. The judgment rejected claims of collusion to defraud the Customs Department, emphasizing the corporation's absolute ownership post-default. Precedents and the non obstante clause in the Act supported the judgment's conclusion that respondent authorities cannot restrain the petitioner from lifting the property.In conclusion, the writ petition was allowed with a directive for the State Financial Corporation to undertake payment if any adjudication determines liability against the loanee, emphasizing the corporation's commitment in the sale confirmation letter.
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