Liquidation sale dues: pre-sale municipal tax claims stay with the corporate debtor, not the auction purchaser.
In a liquidation sale conducted on an "as is where is" and "no recourse" basis, municipal property tax dues that accrued before sale confirmation are treated as claims against the corporate debtor or liquidation estate, not as liability of the auction purchaser. The sale having been completed and possession delivered before the demand notice, earlier public charges were to be addressed within the liquidation framework and discharged by the seller-side process. The purchaser therefore cannot be fastened with pre-sale municipal dues, and a demand notice seeking to recover them from the purchaser is not sustainable.
Issues: Whether the auction purchaser could be held liable for municipal property tax dues that accrued before confirmation of the sale, and whether the demand notice issued for such dues could be quashed in liquidation proceedings under the Insolvency and Bankruptcy Code, 2016.
Analysis: The property was sold by the liquidator on an "as is where is and whatever there is" and "no recourse" basis. The sale stood completed and possession was delivered before the municipal demand notice was issued. The pre-sale property tax dues related to a period prior to sale confirmation and were treated as claims against the corporate debtor, akin to the claim of an unsecured creditor, to be dealt with in accordance with the liquidation framework. The liquidation regulations also require the liquidator to make a public announcement and prepare an asset memorandum, and public charges accrued up to the date of sale are, under the Transfer of Property Act, for the seller to discharge. The auction purchaser was therefore not liable for the earlier dues, and the municipality could not fasten that liability on the purchaser after the sale.
Conclusion: The auction purchaser was not liable for the pre-sale municipal tax dues, and the demand notice was rightly quashed.
Final Conclusion: The challenge to the order failed, and the protection granted to the auction purchaser against liability for prior municipal tax dues was upheld.
Ratio Decidendi: In a liquidation sale conducted on an "as is where is" and "no recourse" basis, municipal dues that accrued before sale confirmation remain claims against the corporate debtor or liquidation estate and cannot be enforced against the auction purchaser.
TaxTMI 
AI Drafter ✕
TaxTMI 
