Bona fide purchaser protection denied where sale deeds shifted tax liabilities to the buyer and showed notice of dues.

A purchaser who acquired property in a statutory sale under the State Financial Corporations Act, 1957 could not claim the protection of a bona fide purchaser against the defaulting dealer's sales tax dues where the sale documents expressly put the property on an as is where is basis and required the buyer to bear commercial tax and other statutory liabilities. The second sale deed also excluded warranties and stated that any taxes, levies, or liabilities found due would be payable by the purchaser. The buyer's own letter showed awareness of the tax dues and a request for a reduced price. On these facts, the Madras HC held that the purchaser had notice of the liability and was not entitled to protection under Section 24-A of the Tamil Nadu General Sales Tax Act, 1959.

---

---

Issues: Whether the petitioner, having purchased the property in a sale under the State Financial Corporations Act, 1957, was entitled to protection as a bona fide purchaser without liability for the sales tax dues of the defaulting dealer under Section 24-A of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The sale documents expressly stated that the property was sold on an as is where is basis and that the purchaser would bear commercial tax and other statutory dues. The second sale deed also excluded express or implied warranties and specifically recorded that taxes, levies and other liabilities, if found due in respect of the property, would be borne and paid by the purchaser. The petitioner's own letter acknowledged awareness of the sales tax liability and sought a reduced price on that basis. On these facts, the petitioner had notice of the tax dues and could not claim the status of an innocent purchaser protected by the proviso to Section 24-A of the Tamil Nadu General Sales Tax Act, 1959. The statutory sale under the State Financial Corporations Act, 1957 did not create an encumbrance-free title in the face of the specific contractual terms.

Conclusion: The petitioner was not a bona fide purchaser and was not entitled to protection under Section 24-A of the Tamil Nadu General Sales Tax Act, 1959; the writ petition failed.

---