Recovery from trustees and banker fails where assignment transfers ownership and section 39 conditions are unmet.

Section 39 of the Bombay Sales Tax Act, 1959 could not be used to recover tax dues from trustees or their banker where business assets had been validly assigned under a deed of arrangement for the benefit of creditors. The arrangement transferred legal ownership of the assets and sale proceeds to the trustees for realisation and distribution, so they were neither agents nor successors of the defaulting dealers. As the bank did not hold money due to, or on account of, the dealers, the foundational for invoking section 39 was absent. The recovery notices were therefore without jurisdiction and liable to be set aside.

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Issues: Whether section 39 of the Bombay Sales Tax Act, 1959 could be invoked against the trustees and their banker in respect of sale proceeds realised under an assignment for the benefit of creditors, where the trustees were not transferees or successors of the businesses of the defaulting dealers.

Analysis: Section 39 authorises recovery from a person from whom money is due to a dealer, or who holds money for or on account of such dealer. The deed of arrangement vested the assigned properties in the trustees for realisation and distribution among creditors, creating a valid trust and transferring legal ownership of the properties and sale proceeds to the trustees. The trustees did not hold the sale proceeds as agents of the firms, nor were they successors to the businesses. The bank therefore did not hold money due to, or on account of, the dealers concerned. Since the foundational condition for action under section 39 was absent, the recovery notices could not be sustained.

Conclusion: Section 39 was inapplicable on the facts, and the notices issued to the bankers were without jurisdiction and liable to be set aside.

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