Municipal tax dues in liquidation cannot be enforced against auction purchasers for the pre-transfer period outside the insolvency process.

Municipal property-tax dues for the pre-transfer period could not be retrospectively enforced against auction purchasers who were strangers to the property during that time, and the demand for periods before transfer was unsustainable. Once liquidation under the Insolvency and Bankruptcy Code, 2016 had commenced, municipal claims had to be lodged with the liquidator and dealt with under the statutory priority framework; independent recovery outside the Code was impermissible where no claim had been filed. "As is where is" sale terms did not override that statutory scheme or fasten pre-existing liabilities on the purchasers. The impugned notice, assessment and tax bill were set aside to that extent.

---

---

Issues: (i) Whether municipal property-tax dues relating to the period prior to the petitioners' purchase could be retrospectively assessed and enforced against them. (ii) Whether, after liquidation under the Insolvency and Bankruptcy Code, 2016, municipal dues had to be lodged and realised only through the liquidation process. (iii) Whether the auction-sale conditions could fasten pre-existing municipal liabilities on the petitioners as purchasers.

Issue (i): Whether municipal property-tax dues relating to the period prior to the petitioners' purchase could be retrospectively assessed and enforced against them.

Analysis: The property had gone into liquidation before the petitioners purchased it. The municipal authority had not crystallised or lodged the claimed dues with the liquidator for the relevant earlier period. The Court held that the petitioners, being strangers to the property for the prior period, could not be saddled with liability for a time when they were not owners, and any pre-liquidation claim had to follow the insolvency framework rather than a fresh retrospective levy against the purchasers.

Conclusion: The retrospective municipal demand for periods prior to 26 September 2019 was unsustainable against the petitioners.

Issue (ii): Whether, after liquidation under the Insolvency and Bankruptcy Code, 2016, municipal dues had to be lodged and realised only through the liquidation process.

Analysis: The Court applied the overriding effect of the Insolvency and Bankruptcy Code, 2016 and treated municipal property-tax dues as operational debt. It held that once liquidation commences, statutory and municipal claims must be asserted before the liquidator and dealt with under the statutory priority framework. Independent recovery under municipal law outside the Code was impermissible where no claim had been lodged in the liquidation process.

Conclusion: Pre-liquidation municipal dues could be enforced only in accordance with the Insolvency and Bankruptcy Code, 2016, particularly the liquidation and priority scheme.

Issue (iii): Whether the auction-sale conditions could fasten pre-existing municipal liabilities on the petitioners as purchasers.

Analysis: The sale terms on an "as is where is" and "whatever there is" basis did not override the statutory scheme under the Insolvency and Bankruptcy Code, 2016. In the absence of any quantified arrear demand existing against the petitioners at the time of transfer, and in the absence of a claim lodged before the liquidator, the contractual clause could not revive or preserve an otherwise unenforceable municipal demand against the auction purchasers.

Conclusion: The sale conditions did not make the petitioners liable for pre-liquidation municipal dues.

Final Conclusion: The impugned notice, assessment and tax bill were set aside to the extent they sought to burden the petitioners with dues for the period before transfer, while the municipal authority was left free to assess and recover tax only from the date of title transfer in accordance with law.

Ratio Decidendi: In liquidation, municipal dues are subject to the Insolvency and Bankruptcy Code, 2016 and cannot be independently enforced against an auction purchaser for the pre-transfer period unless duly asserted in the liquidation process and dealt with under the statutory priority framework.

---