2012 (6) TMI 922 - HC - Indian Laws

Court dismisses petition by Private Limited Company on coercive bank action, liability for tax dues

M/s. Swagatika Impex Pvt. Ltd Versus UCO Bank and others

The court dismissed the petition, denying relief to the petitioner, a Private Limited Company, in a case concerning coercive action by a bank, knowledge ... - Issues Involved:1. Validity of the coercive action by the respondent Bank.2. Knowledge and implications of existing encumbrances on the property.3. Applicability of Section 100 of the Transfer of Property Act, 1882.4. Liability for outstanding commercial tax dues.Summary:1. Validity of the coercive action by the respondent Bank:The petitioner, a registered Private Limited Company, purchased plots and machinery for Rs.1.30 crores and deposited Rs.60 lakhs. The petitioner raised a grievance against the respondent Bank's coercive action, which threatened forfeiture of the deposited amount if the remaining amount was not paid by the deadline set in the letter dated 9.8.2007.2. Knowledge and implications of existing encumbrances on the property:The property in question belonged to Bhopal Transmission Control, which defaulted on a loan, leading the Bank to declare the account as N.P.A and take possession u/s 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The property was charged with outstanding commercial tax dues amounting to Rs.1,43,15,655/-. The petitioner was aware of these liabilities during private negotiations with the Bank.3. Applicability of Section 100 of the Transfer of Property Act, 1882:The petitioner argued that the charge of the Commercial Tax Department was not binding on them u/s 100 of the Transfer of Property Act, 1882. However, the court found that the petitioner had constructive knowledge of the encumbrances before entering into the private treaty. The auction notice did not culminate in an accepted bid, and the transaction was through private negotiation, making Section 100 inapplicable.4. Liability for outstanding commercial tax dues:Section 530 of the Vanijyik Kar Adhiniyam, 1994, and Section 33 of the VAT Act, 2002, stipulate that tax dues are a first charge on the property. The petitioner, having agreed to take over the assets and liabilities, was liable for the outstanding commercial tax dues. The court noted that the petitioner had expressed willingness to take over the company and its liabilities, including statutory taxes, in various correspondences.Conclusion:The petition was dismissed, and the petitioner was not granted any relief. The petitioner and the respondent Bank were given the liberty to avail remedies u/s 33 (2) of the VAT Act, 2002. The Commercial Tax Department was allowed to proceed with the auction to realize their dues.