Statutory charge for sales tax arrears yields to bona fide purchase without notice, but constructive notice defeats that protection.

A statutory charge for sales tax arrears under the Tamil Nadu General Sales Tax Act does not prevail against a transferee who purchases for value without notice unless the statute clearly so provides, and notice includes constructive notice from wilful abstention or gross negligence. On the facts, the purchasers failed to establish absence of notice and were treated as having constructive notice, so the property remained liable for recovery of the arrears. The materials also showed that S.V. Traders was a partnership concern, not a proprietary concern, making the partners jointly and severally liable and supporting enforcement of the tax charge against the property.

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Issues: (i) Whether a bona fide purchaser for value without notice is protected against a statutory charge created for sales tax arrears under section 24 of the Tamil Nadu General Sales Tax Act, 1959. (ii) Whether the purchasers in the present case were bona fide purchasers without notice, and whether the property purchased by them could be proceeded against for recovery of the vendors' sales tax arrears. (iii) Whether S.V. Traders, Kancheepuram was a proprietary concern or a partnership concern, and the effect of that finding on the tax liability and charge over the property.

Issue (i): Whether a bona fide purchaser for value without notice is protected against a statutory charge created for sales tax arrears under section 24 of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The statutory scheme was considered in the light of section 24 of the Tamil Nadu General Sales Tax Act, 1959 and section 100 of the Transfer of Property Act, 1882. The charge created by law for tax arrears does not override the protection available to a transferee who purchases for consideration and without notice, unless the statute expressly provides otherwise. The Court also relied on the settled meaning of "notice" under section 3 of the Transfer of Property Act, 1882, including constructive notice arising from wilful abstention from enquiry or gross negligence. The earlier contrary views were held to be no longer good law in view of the later Supreme Court authority applying the protection in favour of bona fide transferees.

Conclusion: A bona fide purchaser for value without notice is protected, and the property cannot be proceeded against for recovery of sales tax arrears.

Issue (ii): Whether the purchasers in the present case were bona fide purchasers without notice, and whether the property purchased by them could be proceeded against for recovery of the vendors' sales tax arrears.

Analysis: The Court found that the plaint did not plead the material facts necessary to establish want of notice, including any enquiry made by the purchasers or the basis on which they claimed protection. Under Order 6 Rule 2 of the Code of Civil Procedure, 1908 and section 101 of the Evidence Act, 1872, the burden lay on the purchasers to prove the facts entitling them to the protection of being purchasers without notice. The evidence showed absence of enquiry, admission in cross-examination, and conduct consistent with knowledge of the tax arrears. The Court treated this as constructive notice, amounting to wilful abstention or gross negligence. It therefore held that the purchasers could not claim the statutory protection against the charge.

Conclusion: The purchasers were not bona fide purchasers without notice, and the property was liable to be proceeded against for recovery of the tax arrears.

Issue (iii): Whether S.V. Traders, Kancheepuram was a proprietary concern or a partnership concern, and the effect of that finding on the tax liability and charge over the property.

Analysis: On a review of the documentary evidence, including the assessment records, demand notices, partnership declaration, and tribunal findings, the Court concluded that S.V. Traders was a partnership concern consisting of T.P. Narayanasamy and T.N. Subash. By virtue of section 19 of the Tamil Nadu General Sales Tax Act, 1959, the firm and its partners were jointly and severally liable for the tax dues. The Court also held that the Trial Court had given undue weight to testimony that did not establish the constitution of the firm, while the documentary evidence supported the existence of a partnership and the validity of the charge.

Conclusion: S.V. Traders was a partnership concern, and the tax liability and consequent charge extended to the partners' property.

Final Conclusion: The charge for sales tax arrears was enforceable against the property because the purchasers were not shown to be bona fide transferees without notice, and the vendors' business was found to be a partnership attracting joint liability under the sales tax law.

Ratio Decidendi: A statutory charge for tax arrears cannot be enforced against a transferee who has purchased for value without notice, but the transferee must plead and prove the facts establishing absence of notice; in the absence of such proof, constructive notice and the statutory charge will prevail.

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