Statutory charge on property defeats bona fide purchase claim where sale occurred during pending tax recovery proceedings.

Transfers made during pending tax recovery proceedings are vulnerable where the statute creates a first charge on the property and treats the unpaid dues as recoverable arrears. A purchaser must show absence of notice and bona fide acquisition; on the stated facts, the sale was executed despite subsisting recovery action and the statutory protection under Section 27 of the Andhra Pradesh Value Added Tax Act, 2005 was unavailable. A later Corporate Insolvency Resolution Process did not displace recovery steps already founded on earlier tax proceedings, so the revenue authorities' action against the property remained maintainable.

---

---

Issues: (i) Whether the purchaser of the subject property was a bona fide purchaser for value without notice and whether the sale was protected from the operation of Section 27 of the Andhra Pradesh Value Added Tax Act, 2005; (ii) Whether the revenue authorities lacked jurisdiction to proceed against the property in view of the Corporate Insolvency Resolution Process pending against the vendor company.

Issue (i): Whether the purchaser of the subject property was a bona fide purchaser for value without notice and whether the sale was protected from the operation of Section 27 of the Andhra Pradesh Value Added Tax Act, 2005.

Analysis: The subject property formed part of assets covered by a deferred sales tax arrangement under which the vendor company undertook not to alienate the fixed assets until the Government loan was fully repaid. Recovery proceedings had already been initiated when the vendor sold the property to the petitioner. Sections 25 and 26 of the Andhra Pradesh Value Added Tax Act, 2005 treated the unpaid deferred tax as recoverable as arrears of land revenue and created a first charge on the property. Section 27 further rendered transfers made during the pendency of proceedings void unless the dealer proved absence of intention to defraud revenue. The sale deed was executed despite the subsisting recovery proceedings and contrary to the undertaking, and no satisfactory enquiry or material established bona fides or lack of notice.

Conclusion: The sale was held to be hit by Section 27 of the Andhra Pradesh Value Added Tax Act, 2005 and the plea of bona fide purchase was rejected, against the petitioner.

Issue (ii): Whether the revenue authorities lacked jurisdiction to proceed against the property in view of the Corporate Insolvency Resolution Process pending against the vendor company.

Analysis: The insolvency proceedings and moratorium arose long after the property had already been subjected to tax recovery measures and had been sold by the vendor. Since the attachment and the impugned recovery steps were rooted in proceedings commenced before the insolvency admission order, the pendency of the Corporate Insolvency Resolution Process did not divest the revenue authorities of power to proceed against the property. The claim that recovery had to be pursued only before the Resolution Professional was therefore untenable on the facts.

Conclusion: The plea based on insolvency and moratorium was rejected, against the petitioner.

Final Conclusion: The writ petition failed on both issues because the transfer was void against the revenue and the later insolvency proceedings did not bar the statutory recovery action.

Ratio Decidendi: Where a statute expressly provides that transfers made during the pendency of tax recovery proceedings are void unless absence of fraudulent intent is proved, a subsequent transferee cannot defeat recovery by claiming bona fide purchase without notice; a later insolvency moratorium does not displace recovery steps already founded on prior statutory proceedings.

---