2026 (2) TMI 283 - HC - VAT / Sales Tax

DRT sale certificate effect on revenue records: purchaser's registration free of encumbrances confirmed, salestax charge removed subject to further court orders

A DRT-confirmed auction sale and registered sale deed require removal of statutory charges from revenue records; the Talathi was directed to delete the ... Binding effect of DRT sale certificate on revenue records - removal of encumbrances from 7/12 extract - priority of secured creditor's recovery under the RDB Act over unregistered statutory charges - constructive notice insufficient without registration on CERSAI - HELD THAT:- It is not in dispute that the petitioners have purchased the property pursuant to auction sale. The property in question was mortgaged with the Punjab National Bank. The DRT has passed a categorical order directing removal of all charges from the Revenue Records and registration of the petitioner’s name without encumbrances. This order is not challenged. It was, therefore, necessary to give effect to the order of the competent forum in its letter and spirit. The DRT having confirmed the auction sale and further having addressed the communication to the Talathi–Wada to remove the charge of the Sales Tax and State Tax Department from the 7/12 extract of the land in question, in our opinion, the Talathi was then not justified in recording the charge of the Sales Tax Department in the ‘other rights’ column. There is no challenge to the order passed by the DRT in O.A.No.407 of 2016 or for that matter, the order passed by the Tahsildar–Wada. As can be seen from the finding of the Tahsildar– Wada in the order dated 1st September 2023, it has clearly been recorded that in terms of the registered sale-deed, the parties have executed the registered sale deed before the Deputy Registrar–Wada and hence, sale certificate is duly registered in accordance with law. The Tahsildar has clearly held that the complaint made by the Deputy Commissioner–Sales Tax Department is rejected by observing that if at all the Sales Tax Department is to seek necessary reliefs, the same has to be by approaching the Civil Court of competent jurisdiction. It is further observed that the decision of the Civil Competent Court will be binding on the parties. In such view of the matter, it is impermissible for the Talathi to continue the charge of the Sales Tax Department in the ‘other rights’ column. The petition must succeed. This is, however, subject to orders that may be passed by the Courts of competent jurisdiction. Learned Addl. G.P. submitted that the Sales Tax Department intends to challenge the order of the DRT in R.P.No.308 of 2019 in O.A. No.407 of 2016 before the appropriate forum. It is made clear that the revenue entry in favour of the petitioner based on this order is subject to the orders that may be passed by the Court of competent jurisdiction. The Writ Petition is, therefore, allowed in terms of prayer clause (a). Issues: Whether the petitioner, as an auction-purchaser under a confirmed DRT sale, is entitled to deletion of entries recording encumbrances of the Sales Tax/State Tax Authorities from the 7/12 extract and registration of the petitioner's title without such encumbrances.Analysis: The challenge relates solely to prayer (a) seeking removal of recorded encumbrances from revenue records in respect of land purchased in a DRT auction. The DRT issued a sale certificate in favour of the petitioner, confirmed the sale and by its communication directed the Talathi to remove charges of the Sales Tax and State Tax Departments from the 7/12 extract. The Tahsildar rejected the objection filed by the Sales Tax Department and confirmed the mutation entry; that order was not challenged. The Revenue continued to record the purported tax charges in the 'other rights' column despite the unchallenged DRT direction and the Tahsildar's order. The petitioner's purchase followed due process, the sale certificate was registered, and there was no registration of any statutory charge with the Central Registry (CERSAI) prior to the auction. In these circumstances, the direction of the competent forum to remove encumbrances and register the purchaser's title without charges must be given effect to, subject to any orders that may be passed by courts of competent jurisdiction.Conclusion: The petition is allowed to the extent of prayer (a); the entries recording encumbrances of the Sales Tax and State Tax Authorities shall be removed from the 7/12 extract and the petitioner's title shall be registered without such encumbrances. Relief under prayer (b) is left open.Ratio Decidendi: A confirmed auction sale under the DRT with a registered sale certificate and an unchallenged direction to remove charges requires removal of revenue-record entries of statutory tax encumbrances so as to give effect to the DRT's order; recorded tax charges not registered prior to the auction do not bind a bona fide auction purchaser.