Bona fide purchaser protection bars sales tax recovery against property bought for value without notice of arrears.

A sales tax charge under the Tamil Nadu General Sales Tax Act, 1959 could not be enforced against an auction purchaser who bought the property for valuable consideration without actual or constructive notice of the defaulter company's arrears. The Court applied the protection in section 24A and the principle reflected in section 100 of the Transfer of Property Act, 1882, holding that a transferee for consideration without notice is not liable to have the property attached for the seller's unpaid dues. As the sale notices disclosed no encumbrance or condition regarding tax liability, the impugned attachment and recovery proceedings were set aside.

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Issues: Whether an auction purchaser who bought the property for valuable consideration without notice of the sales tax arrears could be proceeded against for recovery of the defaulter company's tax dues by attaching the property in his hands.

Analysis: The property was purchased in public auction from the Debts Recovery Tribunal and another portion was purchased from the Official Liquidator. The sale notices did not disclose any condition requiring payment of the seller's sales tax arrears. Under section 24(1) of the Tamil Nadu General Sales Tax Act, 1959, tax arrears create a charge on the property, but section 24A protects a transfer made for adequate consideration and without notice of the pending liability. The legal position on enforcement of a charge against a transferee is also controlled by the principle embodied in section 100 of the Transfer of Property Act, 1882, namely that a charge cannot be enforced against a transferee for consideration without notice. On the facts, there was no material to show actual or constructive notice to the purchaser, nor any encumbrance or disclosure in the sale notices.

Conclusion: The purchaser was a bona fide purchaser without notice and the sales tax recovery proceedings against the property were not sustainable.

Final Conclusion: The impugned attachment and recovery action were set aside, and the writ petition was allowed.

Ratio Decidendi: A charge for sales tax arrears under the Tamil Nadu General Sales Tax Act, 1959 cannot be enforced against a purchaser for valuable consideration who acquired the property without notice of the charge or the liability.

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