TaxTMI 
TaxTMI 
2008 (9) TMI 888
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....n. W.P. No. 5324 of 2008 is filed by the petitioner to challenge the auction notice dated March 12, 2008, sale confirmation dated March 26, 2008 and the sale certificate dated April 21, 2008 issued by the Deputy Commercial Tax Officer, Nilakottai. The brief facts leading to the impugned order are as follows: The petitioner-company set up an industrial unit at Kullalagundu Village, Nilakkotai Taluk, for the manufacture of sulfuric acid. It is stated that the company invested Rs. 1.6 crores, out of which loan of Rs. 68.69 lakhs was obtained from TIIC Limited and Rs. 25.07 lakhs loan from the Central Bank of India. The property in which the factory was situated was purchased jointly by K.K. Surendranath and his brothers K.K. Karunakaran and K.K. Gnanaprabakaran and K. K. Dinakaran by a sale deed dated November 4, 1988 and the lands were given on lease by the four brothers in favour of the company by a lease deed dated April 17, 1992. A suit for partition and demand for one fourth of share was filed by one K.K. Dinakaran (petitioner in W. P. No. 5324 of 2008) is pending before the District Judge, Madurai in O. S. No. 51/2007. It is also shown that the patta No. 185 survey Nos. 235/....
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....t, two directors, namely, K.K. Surendranth and K.K. Gnanaprabakaran has got only 50 per cent of the undivided share in the lands and it could not have been sold in its entirety. Further, since the petitioner is a company, the directors cannot be held personally liable for the arrears of the company. It is further submitted that the procedure contemplated under section 36 of the Tamil Nadu Revenue Recovery Act, 1864 (for short, "the TNRR Act") was not followed. In terms of section 38(3) of the Act, confirmation can be done after clear 30 days. Under section 22, no sale can take place before 15 days from the date of the notice. No wide publicity given for the sale. Apart from these objections, K.K. Dinakaran (petitioner in W.P. No. 5324 of 2008) stated that no notice was given to the interested persons of the property. On behalf of the commercial tax department, a counter-affidavit in W.P. 4378 of 2008 has been filed, in which it is stated that cancellation of the deferral agreement was done since the petitioners have violated the conditions of deferral agreement. No objection was filed by the petitioner under section 38(1) of the TNRR Act. The confirmation of sale was thoug....
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....k, non-viable category petitioner is entitled to waiver of interest on sales tax arrears and as such, petitioner has applied for grant of such waiver to the Government vide various applications ending with an application dated October 11, 2007. Even though, petitioner is legitimately entitled to the said interest waiver and it is confident of being granted the same, yet, in the event of the said waiver not being granted finally, petitioner undertakes to pay the interest amount as well. ... 5.. Petitioner respectfully submits that an inventory of the machineries lying in the property was taken and also valued prior to sale. The said machineries, I understand, have been removed by the auction purchaser and are not now available at the site. Stock in process worth about Rs. 20 lakhs was also available when possession of the union was taken over by the respondents herein. It appears, the same are not available now. Further, a fully furnished guest house, which was in existence in the premises has also been demolished. Be that as it may, petitioner unconditionally undertakes to deposit the sum of Rs. 45,67,264 with five per cent poundage payable to the auction purchaser within such ti....
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....n in W.P. No. 1964 of 2004 itself came to be disposed of on July 9, 2007 by a learned judge by the following order: "2. Learned Special Government Pleader has submitted that the issue involved in this writ petition is squarely covered by the decision of the Supreme Court reported in Deputy Commercial Tax Officer v. Corromandal Pharmaceuticals [1997] 105 STC 327 and held in favour of the Revenue." It is not clear as to how this order can operate as res judicata for the present claim made by the petitioners. In this case, the petitioners are not seeking for any direction for declaring the company as a sick unit. Further, the auction notice impugned in the writ petition was not given effect to and subsequently there were two other auction notices. Therefore, this court is unable to accept the plea raised by the respondents. In view of the above, the following questions remain to be answered: (a) Whether the auction held in terms of TNRR Act was vitiated by procedural irregularities? (b) Whether the auction notice is liable to be set aside for want of notice to the petitioner in W.P. No. 5324 of 2008? Mr. S. Parthasarathy, learned Senior Counsel for the petitioners, relied upon t....
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....itute an illegality which is not covered by section 38 of the Act. If such an illegality is established, it is certainly open to the owner of the land, whose land has been sold away, to approach a civil court or this court in exercise of jurisdiction under article 226 of the Constitution to ask for relief by way of setting aside the sale. . ." He also placed further reliance upon the latest Supreme Court judgment in Karnataka State Financial Corporation v. N. Narasimahaiah reported in [2008] 5 SCC 176 and stated that between the protection of the property and right of recovery the interpretation of the law should lean in favour of person who is going to be deprived of his right. He placed reliance upon the following passages found in para 42: "42. Interpretation of a statute would not depend upon a contingency. It has to be interpreted on its own. It is a trite law that the court would ordinarily take recourse to the golden rule of literal interpretation. It is not a case where we are dealing with a defect in the legislative drafting. We cannot presume any. In a case where a court has to weigh between a right of recovery and protection of a right, it would also lean in favour of ....
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....ce of a remedy by way of a suit is not always a bar to the entertainment of a petition under article 226 of the Constitution. 11.. As we have held above that the Collector, acting merely under the Madras Revenue Recovery Act, has no power to attach and sell property registered in the name of any one other than the defaulter, we would have issued a writ of mandamus to forbid him from continuing the proceedings against the property of the petitioner. . ." He also relied upon the judgment of Papammal v. State of Tamil Nadu reported in [1977] MLJ (II) 157 and referred to the following passage: ". . . A bare reading of these provisions makes it quite clear that the Collector or the officer authorised by him in that behalf can recover the arrears of land revenue only by the sale of the moveable and immovable property belonging to the defaulter." He also referred to the judgment of this court in Chamundeeswari v. Commercial Tax Officer reported in [2007] 6 VST 399 for the proposition that the properties of the director of the company cannot be proceeded with in an auction sale while claiming commercial tax dues and placed reliance upon the following passage: (page 401) ". . . It is w....
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....is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. . ." In reply to this submission, Mr. R. Viduthalai, learned Senior Counsel appearing for the auction purchaser, submitted that once confirmation of sale takes place even if the decree under which the sale was ordered has been reversed before confirmation of sale it cannot nullify the sale. In this context, he relied upon the judgment of the Supreme Court in Janak Raj v. Gurdial Singh reported in [1967] AIR 1967 SC 608. The following passage found in para 5 is pressed into service and it is as follows: ". . . It is certainly hard on the defendant-judgment-debtor to have to lose his property on the basis of a sale held in execution of a decree which is not ultimately upheld. Once, however, it is ....
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....hta v. Custodian reported in [2006] 2 SCC 385. In paragraph 70 of that judgment, it is held as follows: "70. . . . evidently, creation of any third-party interest is no longer in dispute nor the same is subject to any order of this court. In any event, ordinarily, a bona fide purchaser for value in an auction sale is treated differently than a decree-holder purchasing such properties. In the former event, even if such a decree is set aside, the interest of the bona fide purchaser in an auction sale is saved. . ." In the light of the legal submissions, the learned Senior Counsel for the auction purchaser submitted that the demand of the petitioner was not bona fide and their intention was to forestall any collection of tax due by the Revenue. Therefore, he pleaded for the dismissal of the writ petitions. On the basis of the rival submissions and the legal precedents the following propositions emerge: (i) The procedure under the Revenue Recovery Act for selling the property of the judgment-debtor must be strictly followed. (ii) The illegalities in procedure will vitiate the sale. (iii) The land owner whose property illegally sold is entitled to move this court notw....