2025 (7) TMI 1256 - HC - VAT / Sales Tax

Commercial Tax Department can declare defaulting assessee sales voidable under Section 53 Transfer of Property Act

S.J. Natural Minerals, rep by its Partner, T. Marirajan Versus State Tax Officer, The Sub Registrar, Sattur

S.J. Natural Minerals, rep by its Partner, T. Marirajan Versus State Tax Officer, The Sub Registrar, Sattur - TMI ISSUES: Whether a sale deed executed by a tax defaulter can be declared voidable by the Commercial Tax Department under Section 53 of the Transfer of Property Act, 1882.Whether the Commercial Tax Department can register a charge or encumbrance over the property purchased by a subsequent purchaser despite the sale deed.Whether the purchaser of the property can claim protection as a bona fide purchaser for consideration against the voidability of the sale deed.What remedies are available to the parties when a sale deed is alleged to have been executed to defeat or delay creditors. RULINGS / HOLDINGS: The sale deed executed by the tax defaulter is 'voidable at the option of the Commercial Tax Department' under Section 53 of the Transfer of Property Act, 1882, if made with intent to defeat or delay creditors.The Commercial Tax Department has the liberty to take steps to cancel the sale deed as null and void and not binding on it; however, it must initiate such action affirmatively.The purchaser may assert the defense of being a 'bona fide purchaser' for consideration, which is protected under the same section.In the absence of steps taken by the Commercial Tax Department to declare the sale void, no encumbrance or charge shall be registered against the property.The petitioner is entitled to file a suit before the Civil Court for appropriate relief, and pending such proceedings, the status quo shall be maintained. RATIONALE: The Court applied Section 53 of the Transfer of Property Act, 1882, which provides that every transfer of immovable property made with intent to defeat or delay creditors is voidable at the option of the creditor, but does not impair the rights of a transferee in good faith and for consideration.The Court relied on precedent decisions affirming the creditor's right to avoid fraudulent transfers and the protections afforded to bona fide purchasers.The judgment clarifies that the mere existence of arrears or tax liability does not automatically invalidate the sale deed unless the creditor exercises the right to avoid the transfer.The Court emphasized procedural fairness by allowing the Commercial Tax Department to initiate cancellation and the purchaser to defend bona fide status, maintaining the principle of balance between creditor rights and purchaser protection.No doctrinal shift or dissenting opinion was recorded; the ruling follows established statutory interpretation and case law.